Virginia governor Glenn Youngkin got an additional $8.5 million tax-free payday from the Carlyle Group, the private equity firm that he used to helm, and now he may have to pay for it.
A lawsuit filed by the Pittsburgh Comprehensive Municipal Trust Fund says the 2020 payout came at the expense of police officers and firefighters.
“The beneficiaries of the city of Pittsburgh Comprehensive Municipal Pension Trust Fund are municipal fire and police personnel serving the city of Pittsburgh. Many are first responders putting their lives on the line every day. They depend on the integrity of the financial markets to provide for their retirement,” the fund said in its lawsuit.
Youngkin was just one of eight Carlyle officials who received a combined over $200 million worth of stock from the firm – free of a tax bill that would have cost over $1 million – and paid for by the company.
“The kind of impunity that Carlyle’s control group acted with is shocking and unacceptable,” lawyers for the Pittsburgh pension fund said in their complaint.
NBC News reported that the $344 million deal cited in the lawsuit was an outlier in a typical tax receivable agreement (TRA), in that it was designed by Carlyle insiders to “maximize the benefits for themselves in every possible way, to the detriment of the company and the public stockholders,” according to the lawsuit.
Prior to leaving the private equity firm, Youngkin received a total of $54 million in compensation during the previous two years.
A spokesman for the Virginia governor said in response to the lawsuit:
“When Mr. Youngkin was a member of Carlyle’s leadership, the Carlyle board and an independent special committee retained independent experts and advisors to consider and approve a transaction that had significant benefits for the company and its shareholders. The plaintiff’s allegations are baseless and will be vigorously defended against.”
New York City-based asset manager and chief investment officer of the financial firm Parallaxes Capital Andy Lee, expressed concerns about the deal to NBC News.
Under normal circumstances, TRA payouts benefit the company and its insiders. Value is exchanged when the insiders get stock, and the company gets tax benefits when selling – which wasn’t the case in this instance.
“If the allegations are true, we would discourage such behavior on the part of management,” said Lee. Adding, “They are supposed to represent the interests of public shareholders.”
Youngkin, who was elected as Virginia governor in Nov. 2021, left the Carlyle Group in September of the previous year.
Original reporting by Gretchen Morgenson at NBC News.
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