GTCR has traded lawsuits with the purchaser of its portfolio company APS Healthcare, which is accusing the Chicago private equity firm of whitewashing the company’s financial health before exit.
On Tuesday, healthcare benefits provider Universal American Corp filed a lawsuit in a US district court claiming GTCR failed to disclose material facts that spelled trouble for the finances and business prospects of APS – which Universal purchased in March 2012 for $222 million. GTCR filed its own lawsuit on Monday to block Universal's claims, according to a Reuters report.
Before the APS sale was completed, Universal claims GTCR knew about certain business relationships and key customer contracts that were at risk of being terminated in the short-term. The company also claims GTCR intentionally omitted these facts during negotiations and violated certain representations and warranties that APS was not in default of any of its material contracts.
A spokesperson for GTCR was not immediately available for comment.
GTCR and other defendants “engaged in a deliberate campaign to conceal the truth about APS prior to the close of the transaction,” Universal said in court papers.
“The avalanche of bad news about APS’s business that did not come to Universal’s attention until just after the March 2, 2012 closing, the complete evaporation of APS’s income within months, and the sheer number of misrepresentations and omissions in the Merger Agreement…are all telltale signs of fraud.”
Universal claims GTCR personnel were regularly appraised of APS’s business and prospects at board meetings, in emails and telephone calls, and received approved drafts of presentations made by APS to Universal, all of which allegedly concealed the true nature of its financial health.
“GTCR personnel dealt directly with APS’s lenders [and] knew that they were nervous about the company’s future,” Universal claimed in court documents.