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August 29, 2008
Private equity firms: Above the law?
Following yet another death related to Simplicity bassinets, the CPSC yesterday gave consumers an extraordinary alert of the hazards and also cautioned that the private equity firm SFCA, which had earlier this year purchased Simplicity's assets, was refusing to participate in a recall of the dangerous products. Fortunately, six major retailers agreed to cooperate with the CPSC and are withdrawing the dangerous products from the market.
According to Annys Shin's story in today's Washington Post, the private equity firm SFCA bought the assets of Simplicity in a way that does not make it liable: Legal experts said SFCA is not obligated to comply with the CPSC's request to do a recall because of the way its purchase of Simplicity's assets was structured. "The reason to buy assets is to not incur liabilities," said Barry Barbash, a partner and head of the asset management group at law firm Willkie, Farr, Gallagher. I expect the Congress will be examining this loophole. Meanwhile, private equity firms are petitioning the Federal Reserve to weaken rules limiting their ability to control financial firms. The SEIU is running a campaign against the proposal and the New York Times has editorialized against it. If this is how private equity treats babies and product safety laws, I doubt we can look forward to their prudential management of the financial system if they get their way with the Fed.
Posted by Ed Mierzwinski at August 29, 2008 09:06 AM
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