On Tuesday, a shipping company owned by The Blackstone Group sued the US Department of Transportation (DOT) for allegedly delaying a loan approval as a result of its private equity ownership.
American Petroleum Tankers (APT) alleges its application for what originally was $470 million in loan guarantees under a federal programme created by Congress to support US shipyards was stalled for 23 months due to the actions of Secretary of Transportation Ray LaHood.
The complaint does not explicitly state why Blackstone’s financial sponsorship was an issue, but it comes at a time when President Obama has traded jabs with Republican presidential hopeful Mitt Romney over his private equity past with Bain Capital. DOT, Blackstone and APT were unable to respond to requests for comment by press time.
The lawsuit claims LaHood, a Republican appointee, violated the loan programme’s statutory provisions by subjecting the loan’s approval to the department’s Credit Council which normally does not oversee specific loan applications. APT claims the Credit Council has to date not endorsed its application based “primarily on the fact that APT is owned by investment funds managed by private equity firms” rather than the merits of its application.
The claim pointed to the Credit Council as the primary source of the government’s private equity concerns. A Reuters investigation revealed the 10-member Credit Council, chaired by LaHood, to be “dominated by Obama appointees” that include a former campaign fundraiser and a member of Obama’s presidential transition team.
The claim alleges that, in April 2012, after receiving signals months before that the loan’s approval was imminent, it was once again delayed following the federal government’s failed investment in solar module maker Solyndra. Solyndra’s bankruptcy filing last year later became a Romney campaign talking point about the federal government’s intrusive involvement in the economy.
The complaint states that, “in the aftermath of the Solyndra loan default at the Department of Energy, applications for loan guarantees were being given more scrutiny and that the issue of providing loan guarantees to companies that were portfolio companies of private equity firms had again been raised.”
APT’s loan application will be rejected automatically if not approved by 31 August, according to the complaint filed in a US District Court in Washington DC. APT is asking the court to prohibit LaHood from interfering with the review process and declare that the Credit Council has no role in the application process.