An alleged bid-rigging conspiracy among Bain Capital and other private equity firms to divvy up targeted companies — including Nashville-based HCA — may have taken as much as $1.6 billion out of HCA shareholders’ pockets by blocking rival bidders and keeping a lid on the final price when the hospital chain was sold in 2006.
“This is potentially a very big story,” said Randall Thomas, a professor at the Vanderbilt University Law School. “It’s all coming out slowly. We’ll see how it evolves. It’s lot more than just HCA.”
The notion that big private equity firms such as Bain, Goldman Sachs and the Blackstone Group engaged in a conspiracy to lower sales prices in leveraged buyouts from 2003 to 2007 remains a key claim in a federal lawsuit in Boston brought against those firms by former HCA shareholders, and by stockholders of other acquired companies — such as Neiman Marcus and Toys “R” Us — snapped up in Wall Street mega-deals before the recession.
HCA — then a public company — went private in 2006 in a $32.1 billion sale to private equity funds Kohlberg Kravis Roberts (KKR), Bain Capital and Merrill Lynch, as well as to family members of HCA’s co-founder Dr. Tommy Frist Jr. and other executives on HCA’s management team.
The size of the deal was a U.S. record at the time, but the federal lawsuit in Boston lays out the legal argument that the price tag was kept artificially low. Attorneys for the private equity firms being sued insist they did nothing wrong.
To me, this explosive story is far more damaging than the “Bain Capital shut down our factory and outsourced our jobs to China” thing because let’s be real here: the elite class does not care about people’s jobs. They care about profits. In their worldview, it’s the free hand of the market outsourcing those jobs, and people need to get trained for a different job that won’t get outsourced. That’s the meme that the elites in both parties spread, it’s what people like Fareed Zakaria and Nick Kristoff tell us in every column and we hear it even in President Obama’s speeches — it’s the global economy, stupid! Work-force retraining! Education! Etc. etc.
But this? This narrative is one of a rigged casino. This is allegations of collusion and price fixing by the big money boys — Bain, Carlyle, Blackstone, Goldman Sachs, as well as the Frist family. This is the big fish carving up the ocean for themselves, their investors be damned. This is the failure of a worldview which claims the profit motive is the perfect antidote to flawed human emotions and is always perfect.
This doesn’t look good for free market capitalism.