Apollo Global Management Settles Supervisory and Disclosure Failure Charges for $52.7M

Apollo Global Management (APO) has agreed to settle for $52.7M allegations that the firm misled fund investors regarding fees and a loan agreement, as well as failed to supervise a senior partner. The settlement was reached with the U.S. Securities and Exchange Commission, which found during its probe that Apollo advisers did not adequately disclose benefits they obtained. This ended up harming fund investors.

Four private equity fund advisors will be paying part of the settlement include:

· Apollo Management V, LP

· Apollo Commodities Management, LP

· Apollo Management VI, LP

· Apollo Management VII LP

The SEC determined that Apollo Advisers accelerated future monitoring fee payments that the funds’ portfolio companies owed when the companies were sold or went into IPO. These lump sum payments that went to the advisers lowered the value of the portfolio companies before the IPO or sale, which reduced how much was distributed to fund investors.

The Commission said that an Apollo adviser did not disclose information about interest payments that were made on a loan between five funds and the affiliated general partner of the adviser. The loan was supposed to defer taxes on interest that had been carried and owed to the partner.

Although the loan agreement mandated that the general partner pay the interest to the funds during the loan—and financial statements revealed that the interest was growing. However, the interest was instead purportedly allocated only to the general partner. As a result, financial statements included misleading disclosures.

In regards to the supervisory failures, this involves a former senior Apollo partner who was caught more than once improperly charging personal expenses to the funds that Apollo advised, as well as to portfolio companies. The partner was verbally scolded and told to pay back any expenses that were improper. However, nothing more was done until an in-house reveal uncovered that the partner had charged more personal expenses to clients. The partner was let go from Apollo.

By settling, Apollo is not denying or admitting to the SEC findings. It has, however, agreed to pay $27.5M in disgorgement, $2.7M in interest, and a $12.5M penalty.

Our securities fraud lawyers represent investors in recouping their losses. Contact The SSEK Partners Group today.

Read the SEC Order (PDF)