September 11, 2013
Photo: Tracy Hunter (CC BY 2.0)
Two companies acquired by private equity manager Olympus Partners in 2011 and 2012 despite then- pending allegations of employer misconduct continue to face labor-related risk
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Olympus Partners has invested a significant portion of its current fund, Olympus Growth Fund V, in two companies that have been sued in the past over alleged wage and hour violations, and that both face on- going employment-related disputes.
Challenges related to managerial practices at a portfolio company are not new to Olympus. In a costly past incident, Olympus Growth Fund III was held liable in an arbitration proceeding for failing to disclose to a subsequent buyer that a portfolio company, Global Link Logistics, was engaging in a falsified records scheme that had begun before Olympus invested in the company.
Two of the companies owned by Olympus Growth Fund V have settled suits over allegedly illegal employment practices since being purchased by the fund. It remains to be seen what kind of leadership Olympus Partners will exert on behalf of OGF V investors in connection with other employment related disputes at those same companies.
Of the $1.5 billion in capital committed to be invested through Olympus Growth Fund V, over 28% was used to purchase equity in two food service companies at times when both were facing class-action lawsuits over wage and hour violations.
In late 2011, Olympus Growth Fund V invested more than $234 million in equity to acquire NPC International in a deal totaling over $750 million.
Before the purchase was announced in November 2011, NPC, the largest Pizza Hut franchisee in North America, was already facing a class action lawsuit filed by delivery drivers who claimed their compensation had been below federal and state minimum wage.[i] Within a year of NPC’s acquisition by Olympus, NPC entered into a confidential settlement of the case covering more than 4,500 drivers.
In January 2013, NPC employees filed a group of new lawsuits alleging further minimum wage violations, such as a claim that workers were asked to perform work “off the clock” without being paid.
The lawsuits,filed in US District Court for the Western District of Tennessee are brought by employees in 5 different work classifications[ii] and they seek to represent NPC employees in 28 states who choose to join the suit. NPC denies the allegations.
In October 2012, Olympus Growth Fund V invested a reported $188 million in equity as part of a $550 million deal to purchase stadium and convention center concessionaire Centerplate.
At the time of the purchase, Centerplate was facing a class action wage and hour lawsuit filed by its employees at Qualcomm Stadium in San Diego.[iii] Just a few weeks prior to being purchased, Centerplate had agreed to pay $750,000 to settle another pay-related suit filed on behalf of employees at Yankee Stadium in New York.[iv]
The San Diego case, in which plaintiffs alleged multiple wage and hour violations, including failure to provide or compensate for rest breaks and failure to pay wages for hours worked, was settled in 2013 for a maximum settlement payout of $650,000.
On January 7, 2013, the US Department of Justice announced that Centerplate would pay $250,000 in civil penalties to settle charges that the company had discriminated against immigrant workers in its hiring process for at least the past three years. The settlement was the third largest amount ever negotiated under the Immigration and Naturalization Act’s antidiscrimination provisions.[v]
An ongoing labor dispute at Centerplate’s operations at AT&T Park in San Francisco has highlighted an additional source of concern, with the company’s unionized workers calling for customers to bring their own food to games and to boycott food and beverage services when booking suites or events. Centerplate workers at the stadium have not received a wage increase in over 4 years, and protests to date have included a one-day strike by concessions workers and a sit-in by supporters at a Centerplate- operated concession stand.
Olympus Partners has previous experience with the legal and financial consequences of questionable activities at one of its portfolio companies. After acquiring Global Link Logistics from Olympus Growth Fund III and a minority partner in 2006, the new owner discovered that Global Link engaged in a practice known as “split-routing,” which involves falsely recording the inland destinations of cargo shipments and then rerouting them by truck to destinations with lower delivery costs.
In 2009, an arbitration panel found that Olympus Growth Fund III and the Olympus Executive Fund, along with their investment partner, had misrepresented Global Link’s financial condition by failing to disclose the company’s use of “split-routing,” and awarded the buyer $12 million in damages, including $4.8 million from the Olympus parties and another $5,600,000 from Olympus and other defendants jointly and severally.[vi]
Olympus was also named in a case brought before the US Federal Maritime Commission in 2009 by one of Global Link’s shipping contractors, which continued for 4 years before being dismissed in July 2013.[vii]
[i] Wass v. NPC International, Inc. (D. Kan)