Aluminum allegations


New York distressed investment specialist MatlinPatterson has withstood pressure from the United Steelworkers union thanks to a major advantage – the firm has the courts, and now the pensions and the National Labor Relations Board, on its side.

As reported in last month’s PEM, MatlinPatterson and its principals have lately been the target of protests and negative publicity campaigns from the Steelworkers in relation to the private equity firm’s investment in struggling Ormet Aluminum. The drama highlights the contingencies faced by private equity firms that invest in unionized companies.

In a series of press releases, the union charged MatlinPatterson with unfair labor practices at an Ormet plant in Hannibal, Ohio. Specifically, the union claimed, among other things, that Ormet violated federal law by unilaterally changing the terms and conditions of worker employment terms and conditions following the beginning of a worker strike last year. The union also claimed that Ormet unlawfully refused to provide information about temporary employees, and that it illegally harassed and trained surveillance cameras on the strikers.

The Steelworkers promised to picket the offices of MatlinPatterson, as well as the private homes of the firm’s principals. ?We’ll follow MatlinPatterson wherever they go and spread the word about MatlinPatterson’s treatment of Ormet employees, read one statement.

The union also promised to lobby public pensions which have commitments to MatlinPatterson’s funds in the hopes of ?coordinating solidarity actions.?

The union also promised to lobby public pensions which have commitments to MatlinPatterson’s funds in the hopes of ?coordinating solidarity actions.?

In addition, a source familiar with the situation said the pensions approached by the Steelworkers have sent letters to the head of the union declining to pursue any engagement with MatlinPatterson on the Ormet matter.

The Wheeling, West Virginia company emerged from bankruptcy in April with MatlinPatterson, a former creditor, as its biggest shareholder. Ormet had been hampered by the high costs of energy and healthcare. Before confirming MatlinPatterson’s reorganization plan, a bankruptcy court had to reject the Steelworkers’ attempt to scrap the deal in favor of a sale to other parties.

In the meantime, company management, led by chief executive officer Michael Williams, continues to negotiate an employment contract with union representatives. Undeterred, the Steelworkers have issued a new press release accusing Ormet and MatlinPatterson of withholding property taxes owed to the county in which the plants are based.

NYC pension pros launch new firm
Adam Blumenthal and Josh Wolf-Powers, former investment professionals for the Comptroller of the City of New York, have left the pension advisor to launch an independent private equity firm. The two have launched Partnership Equity to focus on middle-market investments in ?complex situations, according to a source. Blumenthal was until the beginning of this year first deputy comptroller and chief financial officer in the office of New York City Comptroller William Thompson. Prior to joining Thompson’s office in 2002, Blumenthal was vice chairman of Washington DC-based American Capital Strategies, a publicly traded ?business development company that makes equity and debt investments in private companies. Joining Blumenthal is Josh Wolf-Powers, who until recently oversaw the comptroller’s $4 billion allocation to private equity funds.

Wilson Sonsini opens China practice
The Silicon Valley law firm has nabbed Carmen Chang from rival law firm Shearman & Sterling to launch an office in Shanghai and compete for the business of technology and growth companies in China. The move is yet another indication of the growing business interests that venture capital firms are finding in the region. ?We are seeing increased demand from our clients for China expertise, said John Roos, chief executive officer of Wilson Sonsini, in a statement, which added the firm wanted to open the Shanghai office ?as quickly as possible. Wilson Sonsini is active in technology, life sciences and growth businesses. The firm announced that itwould file for a license with China’s Ministry of Justice to open an office. It is the firm’s first overseas office, although Wilson Sonsini has offices in US technology centers such as Austin, Texas; New York; Reston, Virginia; Salt Lake City, Utah; San Diego, California; San Francisco; and Seattle. As early stage technology companies increasingly rely on overseas development and manufacturing, China and India in particular are looming large for US venture capital firms, which traditionally have not focused on international, or even interstate, business building.

Accel Europe excludes LPs over FOIA issue
The Silicon Valley and London-based venture capital firm has closed its second European and Israel-focused fund on $450 million, but decided to disinvite two former LPs because of concerns over FOIA disclosure. Accel London II was backed by 62 investors, with 38 US-based LPs committing $280 million to the fund and the remaining $170 million from investors outside the US. The London office is led by Kevin Comolli, managing general partner of Accel Europe. Comolli said that the fund was ?significantly oversubscribed and received a number of re-ups from existing investors, but Accel decided to exclude two US limited partners due to concerns over Freedom of Information Act (FOIA) reporting requirements in the US. Accel London I closed in 2001 with commitments of $509 million. The fund has made commitments to 29 portfolio companies, and is almost fully committed. In other news, Accel furthered its global expansion with the announcement of a joint venture with IDG TechnologyVenture Investment, the venture arm of US media company IDG, to launch the $250 million IDG-Accel China Growth Fund.