Monday, May 3, 2010

Carlyle Group Pled "Puffery" in SemGroup Suit

A class action lawsuit by SemGroup shareholders will go forward with The Carlyle Group and Riverstone as defendents. SemGroup imploded from over $3 billion in energy trading losses. The judge wasn't moved by Carlyle's defense:

SGLP Defendants also contend many of the alleged statements are immaterial as a matter of law because they are "simply immeasurable or incapable of verification." [Doc. No. 211, pp. 28-29].[ 5 ] Vague statements of corporate optimism or "puffery" cannot be materially misleading because "generalized statements of optimism are not capable of objective verification and reasonable investors do not rely on them in making investment decisions." The Motion to Dismiss of the Carylyle/Riverstone Defendants [Doc. 201] is denied.

While the company hemorrhaged, management distributed millions to investors and paid themselves hefty bonuses. Carlyle bled SemGroup of more than its initial investment.

This isn't Carlyle's only investor lawsuit. Michael Huffington is suing for the loss of $20 million in Carlyle Capital Corporation (CCC). CCC was a canary in the financial service coal mine. The highly leveraged mortgage backed security investment went bankrupt in March 2008.

Update 3-23-14:  Defendant Carlyle and company reached a $28 million cash-and-stock settlement with SemGroup investors.