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Lincolnshire Management Feels the
Heat
By Evan Vitale
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T.J. Maloney and the private equity firm he controls, Lincolnshire
Management, are under scrutiny once again.
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The last time one may have heard about Lincolnshire was in 2011
when they ran into some trouble after gaining $99 million in a
lawsuit.
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Trouble is not something you expect when you have a
courthouse win of that size and to add to the surprise of the
predicament, it arrived from an unexpected source to boot.
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Lincolnshire’s investors themselves filed a suit against the private equity firm arguing
that they were not given their fair share of the legal gains.
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That case seems to have been more bark than bite, however, as the case remains pending to this
day.
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This time around, the Securities and Exchange Commission is the
one bringing the suit and they have managed to do more than just bark.
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In fact, Lincolnshire has agreed to pay 2.3 million
dollars to settle with the SEC.
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The charges stated that Lincolnshire had improperly
allocated expenses between two funds that it controlled.
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Both of these funds were acting as owners in what, in the eyes of the
SEC, was the same company.
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Lincolnshire, for one reason or another, decided that it would
exchange resources between these two companies as if they were the same. For example, one company, Peripheral Computer Support paid
the entire payroll and 401(k) administrative expenses for
employees of both companies.
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Now, this would not be an issue if both companies decided to do this to their mutual benefit. The issue arises when one company clearly
suffers while the other profits from such a relationship.
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Because the SEC could prove that Computer Technology Solutions - the
name of the other company - was benefiting and Peripheral Computer Support was suffering, or perhaps because Lincolnshire did not want
the SEC to look any deeper, Lincolnshire agreed to pay the
damages and settle the dispute.
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Hopefully, Lincolnshire doesn’t have any more run-ins with the
law for a few years, their reputation could use a break.
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