Ex-spokesman accuses TPG of fee abuse, fraud

Former TPG spokesman Adam Levine is suing the firm for whistleblower retaliation, defamation and the withholding of non-cash compensation, according to a complaint filed in the US District Court of Northern California on Thursday.

Levine, ex-global managing director of public affairs, claims that TPG fired him in December and filed a “baseless” lawsuit against him after he questioned the legality of the firm’s fee and expense practices, which had resulted in TPG’s investors being “defrauded of millions of dollars.”

TPG sued Levine in late January, claiming he stole confidential documents and hardware from an office after hours and shared altered information with the media after being denied a promotion.

The Levine suit paints a different story. Levine alleges that, after reading the “Spreading Sunshine in Private Equity” speech made by US Securities and Exchange Commission (SEC) chief inspector Drew Bowden last May at a PEI conference, he became aware that many of the fee practices Bowden characterized as questionable or illegal, namely billing operating partner expenses back to funds and portfolio companies, were “commonplace at TPG.”

TPG is denying all of Levine’s assertions, according to a TPG spokesperson. He described the suit as “nothing more than a meritless pleading designed to distract attention from Levine’s own egregious and illegal misconduct.”

When TPG planned to build up Levine’s public relations team last June, Levine was told he had to “staff it with consultants and contractors whose costs could be billed to the portfolio companies or LPs, rather than paid out of the management fees collected to cover GP operating expenses,” the complaint notes. He claims TPG billed “as much work as possible” in this way, including the TPG Growth general counsel’s time.

Separately, at TPG’s annual investor conference last October, Levine claims TPG told investors that chief investment officer Jonathan Coslet became CIO in 2009 (when he actually had been CIO since 2007) in order to misrepresent Coslet’s track record and absolve him of failed investments made during 2007 and 2008.

Over the course of six months, Levine raised his concerns about the legality of TPG’s fee allocation, its plan to build his team, and its representation of Coslet’s track record to his superiors, including to founders David Bonderman and Jim Coulter.

The firm responded with threats to harm Levine and ruin his career, according to the suit. Levine told TPG’s general counsel Ronald Cami that he “felt he had no choice but to contact external authorities” about the violations, i.e. the SEC.

TPG asked Levine to leave the firm in November, agreeing to pay all vested and unvested non-cash compensation, but asked that he sign a non-disclosure agreement, to which he refused. When Levine received a questionable figure for his payout, he says he visited the office on a Saturday (around the same time TPG claims he broke in to steal files) in order to review files that would verify his stake in the firm.

TPG officially fired Levine on December 31, 2014 and filed its lawsuit against him on January 26. The Levine complaint describes the TPG suit as “wholly false” and “defamatory.”

“TPG apparently decided to adopt what is best described as a kamikaze legal strategy,” Levine’s lawyer Jordan Thomas told pfm. Thomas, partner at Labaton Sacharow, spent eight years in the SEC’s Division of Enforcement and helped establish its whistleblower program.

Only after seeing the TPG lawsuit against him did Levine bring his case regarding the firm’s fee policy and fraud to the SEC, where it is now under investigation, according to Thomas. The SEC declined to comment.

TPG updated its Form ADV Part 2A Brochure—which includes itemized disclosures in such areas as fees and expenses—just four days ago. While it is unclear which language in the updated filing is new, the document notes that certain funds “reimburse” TPG for “certain organizational expenses” including fees and expenses of counsel, as the Levine lawsuit alleged. It also states that each fund bears all operations expenses including “expenses relating to any audit, investigation, governmental inquiry or public relations undertaking.”