KKR & Co, a private equity house of Kravis would be paying $30 million for settling allegations of cheating its partners. The company allegedly charges investor fees which should not have been charged. For the six year before 2011, the company was unnecessarily charging the investors, the data released by the Security and Exchange Commission revealed. The regulatory body later sued the corporation for the same.
Outside investors were not informed about any decisions and practices. More than $17 million have paid in form of fees and even top level management is not paying anything. Misallocation of fees is increasing in the financial market but for the first time major corporation have been convicted for the same. SEC and PE investors are now paying better attention to the fees charged. All transactions are being carefully watched.
Though the company is paying the fees, it refused to admit any of its mistake or malpractice. KKR’s flagship products resulted in all broken deal expense and therefore KKR didn’t allocate any expenses to the investors. The SEC orders criticized the company. KKR has responded by saying the suit involves iformation about all the transactions of past and any current practices in the company do not have any legal challenge. The company will continue to deliver best to its investors, spokesperson said.
The response looks small considering the scale of the crisis. The management raised billions of dollars through fees. Also this is not a first time when KKR executives are getting rich through hidden fees.