New York-based private equity firm Fenway Partners LLC and four of its executives agreed Tuesday to settle Securities and Exchange Commission charges that they failed to disclose conflicts of interest to a fund client and investors when fund and portfolio company assets were used for payments to former firm employees and an affiliated entity.
Fenway Partners along with principals Peter Lamm and William Gregory Smart, former principal Timothy Mayhew Jr., and chief financial officer Walter Wiacek “weren’t fully forthcoming to the client and investors” about several transactions involving more than $20 million in payments out of fund assets or portfolio companies to an affiliated entity for consulting services and to Mayhew and other former firm employees for services they primarily provided while still working at Fenway Partners, according to an SEC investigation.
Andrew Ceresney, director of the SEC Enforcement Division, said in announcing the agreemen that Fenway Partners and its principals “failed to tell their fund client that they rerouted portfolio company fees to an affiliate, and avoided providing the benefits of those fees to the fund client in the form of management fee offsets.”
Private equity advisors, he warned, “must be particularly vigilant about conflicts of interest and disclosure when entering into arrangements with affiliates that benefit them at the expense of their fund clients or when receiving payments from portfolio companies.”