IT has been reported in January 2015 in the new York post that US regulators have widened their probe of private-equity firms to include alleged bribes paid to foreign government officials.

Private-equity firms have been under the microscope for more than two years as regulators pore over documents to see if the firms have properly disclosed to investors the hundreds of millions in fees they charge their portfolio companies.

The expansion of that probe into whether the PE firms have violated the federal Foreign Corrupt Practices Act — enforced by both the Securities and Exchange Commission and the Department of Justice — is sure to put even more pressure on the companies.

“There is some sense the SEC is exploring issues and has submitted requests for information,” a partner at a law firm in New York who advises large private-equity firms told The Post.

Regulators probing possible FCPA violations have focused recently on several particular industries — like defense contracting and pharmaceuticals — and now appear to be aiming their regulatory guns at the PE sector, law firm Paul Hastings recently warned its clients, sources said.

No PE firm has been singled out and none has been charged in the expanded probe.

The SEC has been very public in its recent examination of PE fees, saying last year it had identified in more than half the firms investigated violations of law or material weaknesses in the ways they disclose fees to their investors.

As part of that probe, investigators who have come across possible violations of the FCPA have been referring those cases to the SEC’s enforcement division, sources said.

“It’s a new and fluid situation that could become more than that,” Homer Moyer, a corporate law attorney with Miller Chevalier, told The Post.

Much of the focus is on PE firms paying middlemen to help them raise money from sovereign wealth funds.

Hedge fund Och-Ziff Capital is being investigated for allegedly making a payment to a friend of Moammar Khadafy’s son to win a $300 million investment from the Khadafy regime, the Wall Street Journal reported in December.

“The odds are pretty high Och-Ziff will not be alone [among hedge funds and PE firms] in getting investigated for making payments to relatives,” the lawyer said.

PE firms commonly use middlemen overseas to raise sovereign wealth money.

“The line of whether it is illegal is ‘Does that agent have the experience to do the job and are they charging a fair market value?’ ” the lawyer said.

Also, important is whether the PE firm is paying an agent who is clear about the agent’s relationship to government officials.

Sovereign wealth funds — like the Nigerian Sovereign Investment Authority — contributed 10 percent of the money PE firms raised from 2011 through 2013, data firm Prequin reported.

That’s double the percentage from 2009.

As a result, many of the larger private-equity firms, like Apollo Global Management and KKR, are raising money from sovereign wealth funds.

“People who work at the sovereign wealth funds are foreign officials,” said Southern Illinois University Professor Mike Koehler, who runs a FCPA blog.

“It’s not the exchange of money to PE firms,” he said. “It’s the PE firms giving things of value to employees to get that business in the first place.”

http://nypost.com/2015/01/07/sec-probes-private-equity-firms-over-alleged-bribes/