Buyout Firm Pays Ethics Fine

Hicks, Muse, Tate & Furst (HMTF) has run afoul of state ethics regulators in Louisiana, and has paid a $5,000 civil penalty to settle the matter.

At issue is a Louisiana statute that prohibits state employees from receiving personal gifts or services from parties that do business with the state. HMTF is one such party, as several of its funds feature the Teachers Retirement System of Louisiana as a limited partner.

Chairman Tom Hicks – who earlier this month announced he will retire from the firm in 2005 – owns the Dallas Stars hockey franchise. And the Dallas-based buyout firm acknowledges that it provided Louisiana state employees with such items as hockey tickets and bottles of champagne, but the firm maintains that it was just conducting business as usual.

Moreover, HMTF stresses that Louisiana already had agreed to invest in HMTF funds before any gifts were provided, although the system did consequently invest in additional funds.

“The items in question were all of nominal value and were provided by HMTF to clients, vendors and others with whom it has business relationships as token and customary goodwill gestures,” the firm said in an official statement.

The firm also said that the gifts were provided in the context of informational review meetings that HMTF was required to hold with those individuals under the terms of its contract with the Teachers Retirement System.

The total value of the items provided to Louisiana officials – added up over several years – was $4,733.

Most states require public employees to report the receipt of gifts from parties doing business with the state, although the line between permitted and prohibited differs from state to state.

A private equity attorney, who requested that his name not be used, says that the best rule of thumb is for GPs to both examine state-specific ethics rules themselves, and to ask LPs to do the same.

“It can hard for a large firm to keep track of all the different rules, so it is also incumbent on them to ask LPs to speak up if a particular statute is being violated,” he adds.