Recent Justice Department False Claims Act Case Against Private Equity Firm Based on Portfolio Company Activities Serves as a Reminder for Private Equity Firms to Exercise Best Practices with Respect to Portfolio Company Management

Recent Justice Department False Claims Act Case Against Private Equity Firm Based on Portfolio Company Activities Serves as a Reminder for Private Equity Firms to Exercise Best Practices with Respect to Portfolio Company Management


By: Christopher Ewan, Steven J. Steinman, David L. Shaw, Douglas W. Baruch, Jennifer M. Wollenberg, John T. Boese

Last month, the Justice Department filed a civil False Claims Act (“FCA”) complaint that could be a harbinger of new enforcement activity against private equity firms. While the allegations alleged in the complaint, if true, are egregious, the PE firm defendant in that case (“PE Firm”) took various actions that enhanced its risk of being targeted for FCA enforcement. At a minimum, private equity firms should assess how this development may impact their operations and portfolio company oversight, and it should serve as reminder for private equity firms to review their practices with respect to portfolio company management.

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