Business community reacts as lawsuit claims that Vista Equity CEO Robert Smith attempts to silence those who expose losses in his fund
LOS ANGELES–(BUSINESS WIRE)–#KurtLauk–Dr. Kurt Lauk, former deputy chief executive officer and chief financial officer of Audi AG, filed a lawsuit on Wednesday, September 11, in Los Angeles federal court against a leading private equity firm, Vista Equity Partners, LLC (“Vista Equity”).
See the Wall Street Journal story: https://www.wsj.com/articles/vista-sued-by-ex-director-of-portfolio-company-solera-11568406812
See the New York Post story: https://nypost.com/2019/09/13/billionaire-who-told-morehouse-grads-hed-pay-student-debt-slapped-with-lawsuit/
The lawsuit alleges that Dr. Lauk, former member of European Parliament and chairman of the Economic Council of the Christian Democratic Party from 2000-2015 (in that capacity, he advised German Chancellor Angela Merkel), suffered damages caused by Vista Equity in his role as a board director of Solera Holdings, Inc. (“Solera”). The board position was terminated after Dr. Lauk’s objection that Solera’s controlling shareholder, Vista Equity, was using myriad schemes that interfered with Solera’s business and was trying to improperly hide Vista Equity losses in its other investments from existing and potential investors.
The lawsuit, filed in U.S. District Court, Central District of California, seeks punitive damages for Dr. Lauk due to Vista Equity’s alleged intentional interference with his contract and negligent interference with prospective economic relations. Kurt Lauk vs. Vista Equity Partners, LLC; Case no. 2:19-cv-07863.
Lauk joined the Solera board of directors in 2013. At that time, Solera was a publicly-traded global leader in the field of software for the automotive insurance industries. Solera, managed by founder and CEO Anthony (Tony) Aquila, was known for its global acquisitions of software companies and profitable consolidation strategies. In 2015, Vista Equity announced it was acquiring Solera in a “go-private” deal that valued Solera at approximately $6.5 billion. Vista Equity became a controlling shareholder (52%) in Solera while promising private equity investors that it was taking a “hands-off” approach to Solera governance, according to the lawsuit.
Dr. Lauk alleges that Vista Equity was not “hands-off” at all and over leveraged Solera with debt, forced un-needed cost-cuts, and stymied profitable acquisition opportunities in favor of transactions that only benefited Vista Equity. Specifically, the lawsuit alleges that Vista Equity pressured Solera to acquire money-losing Vista Equity assets that Vista Equity was trying to “pawn off” on Solera. Dr. Lauk goes on to allege that Vista Equity’s actions “appear designed to mislead current and future investors concerning Vista’s performance, and/or to cover up for Vista’s poor performance, liquidity and/or bad investment decisions…and [Vista Equity CEO Robert] Smith claims neither he nor Vista has ever lost money in an investment so as to lure additional unsuspecting investors into Vista. Smith is hiding these losses and when those that know speak up – like Dr. Lauk – Smith tries to discredit or terminate them.” In fact, Dr. Lauk’s lawsuit details a Vista Equity investment into a company that had $50 million in EBITDA per year, but, after the Vista Equity acquisition, saw its EBITDA reduced to zero.
The lawsuit contains numerous exhibits detailing Lauk’s documented outreach to Vista Equity concerning Vista Equity’s improper governance, and also details the subsequent dismissal of Dr. Lauk and the alleged improper cancelling of Dr. Lauk’s contracted stock options in retaliation.
According to page 15 of Dr. Lauk’s lawsuit, he was hounded out of Solera when he reached out to Vista Equity COO David Breech with this letter in May 2019: “It appears that Vista Equity Partners believes it can violate the corporate governance protocols of Solera Holdings, Inc, and its affiliates, among other things. As you know, I have been objecting to Vista’s inappropriate conduct and so too have other executives. In response, Vista has engaged in a pattern and practice of retaliatory actions against those that raise concerns. Vista’s actions have included, but are not limited to, interfering with employees’ contracts, modifying their job responsibilities, and pressuring them into making false and defamatory statements to support Vista’s wrongful conduct. I must note that Vista has no position in Solera other than in its passive capacity as a shareholder. Yet, Vista is interfering in Solera’s business by acting as if Solera employees are Vista employees, and, worse yet, as if you are the CEO of Solera. Vista’s conduct is simply unacceptable and [Vista] must cease its inappropriate conduct.”
Filing the action on behalf of Dr. Lauk are attorneys Sanford Michelman and Marc Jacobs of the Michelman & Robinson LLP firm, www.mrllp.com.
ABOUT DR. KURT LAUK
Dr. Lauk received his MBA from Stanford Graduate School of Business in 1977. He earned his Ph.D. in Political Science from the University of Kiel in Germany. Between 1978 and 1984, Lauk was a partner with Boston Consulting Group’s German practice. He served as deputy chief executive officer and chief financial officer of Audi AG between 1989 and 1992. He then led the truck division of DaimlerChrysler AG. Dr. Lauk is the co-founder and President of Globe CP GmbH, a private investment firm established in 2000. He served as a Member of the European Parliament from 2004-2009, during which he was a member of the Economic and Monetary Affairs Committee.
For Michelman & Robinson LLP
Michael Nyman/Ross Johnson
The Acceleration Community of Companies