Monday, May 2, 2016

Eight Years Later Carlyle Faces Trial for CCC Implosion

The Carlyle Group's infamous co-founders and public board of directors are involved in legal matters from the spring 2008 failure of Carlyle Capital Corporation.  Carlyle's 2015 10-K filing stated:

Carlyle Capital Corporation Limited (“CCC”) was a fund sponsored by the Partnership that invested in AAA-rated residential mortgage backed securities on a highly leveraged basis. In March of 2008, amidst turmoil throughout the mortgage markets and money markets, CCC filed for insolvency protection in Guernsey

The Guernsey liquidators who took control of CCC in March 2008 filed a suit on July 7, 2010 against the Partnership, certain of its affiliates and the former directors of CCC in the Royal Court of Guernsey seeking $1.0 billion in damages in a case styled Carlyle Capital Corporation Limited v. Conway et al. 

The Guernsey liquidators allege that the Partnership and the CCC board of directors were negligent, grossly negligent or willfully mismanaged the CCC investment program and breached certain fiduciary duties allegedly owed to CCC and its shareholders. The liquidators further allege (among other things) that the directors and the Partnership put the interests of the Partnership ahead of the interests of CCC and its shareholders and gave priority to preserving and enhancing the Partnership’s reputation and its “brand” over the best interests of CCC. 

On July 24, 2013, plaintiffs filed an amended complaint, which contained further detail in support of the existing claims but no new defendants or claims. On December 20, 2013, defendants filed a defense to the amended complaint and on June 30, 2014 plaintiffs filed their reply. In September 2015, the liquidators served expert reports. Expert witness reports for defendants were served during the first week of February 2016. The Court has set a pretrial conference for early April 2016 and trial is scheduled for June 2016.
Will the trial occur as planned?  What business reporting organizations, FT, WSJ or Bloomberg, plan to cover the trial?  It will be interesting to see given how Carlyle's co-founders prize their good name.

Update 7-18-16:  According to WSJ the trial has begun.

Update 12-8-16:  A Dutch billionaire is backing the suit against Carlyle.  He lost big on CCC and appears to want payback.