Apollo Global Management has been accused of “looting” its affiliated life insurance company, Athene Holding, in an investor lawsuit targeting “exorbitant” payments that account for one-third of the management fees earned by the private equity firm.
Through a string of acquisitions, Athene has amassed a $130bn portfolio of assets that is managed by Apollo, making it the private equity firm’s biggest and most lucrative client. In 2018, Athene paid Apollo more than $400m in fees.
A lawsuit filed in New York State Supreme Court last week by the Central Laborers’ Pension Fund, which owns shares in the life insurer, aims to force Apollo to return the profits it has earned from this “extravagantly expensive” arrangement.
Athene floated on the stock market in 2016, less than a decade after it was created by a team led by Apollo co-founder Marc Rowan. Parties related to Apollo own 10.9 per cent of Athene, according to the most recent proxy statement, and the Apollo Group controls 45 per cent of the voting power.
The lawsuit cites a Financial Times investigation published last year, which reported that an internal Apollo study concluded the private equity firm was charging Athene at least twice as much as an unaffiliated investment manager would demand for similar services.
“This equates to Athene overpaying . . . Apollo hundreds of millions of dollars each year,” according to the pension fund’s lawsuit.
Apollo rejected the allegations, stating: “We believe the claims have no merit — both legally and factually — and we intend to defend the case vigorously.” Athene declined a request to comment.
The legal case is an example of a derivative lawsuit, in which shareholders assert a legal action on behalf of the company without the involvement or consent of its board.
According to the claim, which demands unspecified damages, Athene is incapable of taking action by itself because of convoluted governance arrangements and a board that is stacked with Apollo loyalists.
James Belardi, Athene’s chief executive and chairman, is also a shareholder in Athene Asset Management. Despite its name, AAM is not part of the insurance company, but rather a subsidiary of Apollo, which manages the Athene portfolio and receives hundreds of millions of dollars a year for doing so.
Some legal experts say the claim faces significant hurdles, including a potential battle to persuade judges that it should be decided in New York. Athene is based in Bermuda, where law firms are not allowed to charge contingent fees, a device that plaintiff lawyers often use to fund expensive actions against deep-pocketed opponents.
On Wednesday, a federal court in New York declined to intervene in a separate lawsuit that Athene had brought against a former Apollo executive named Imran Siddiqui. Mr Siddiqui said the insurance company’s legal claims against him should be decided in the US, but district judge John Koeltl disagreed, finding that Bermuda was the proper forum.
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