Jury deliberations are expected to begin this week on a civil suit brought by The State of Connecticut against Forstmann Little & Co., a New York-based buyout firm.
The case was filed in February 2002 and charged Forstmann Little with eight different violations of limited partnership agreements with the State of Connecticut, which had invested a total of $198 million into a pair of Forstmann Little funds.
One of the counts was related to securities law violations and was thrown out by Connecticut Superior Court Judge Samuel Sferrazza prior to the trial. Last week, Judge Sferrazza said that there was insufficient evidence to support the bad fair or unfair dealing charges.
He did, however, say that Connecticut had raised legitimate questions in regards to breaches of both fiduciary responsibility and contract.
The case featured more than two days of testimony from Ted Forstmann, but none from either former Forstmann Little partner Erskine Bowles or Connecticut Treasurer Denise Nappier (who is the suit’s formal plaintiff).
Some critics have suggested that Democratic Connecticut Attorney general Richard Blumenthal is playing politics with his witness list, particularly since Forstmann is a major GOP fund-raiser and Bowles is a Democrat running for a U.S. Senate seat in North Carolina.
Bowles also was left off the original complaint and was only added after the omission became an issue in Nappier’s recent race for re-election.
Politics aside, private equity investors are watching the case closely, as some believe that a Connecticut victory could prompt additional LP vs. GP litigation. Such a possibility has been somewhat muted by the dismissal of certain charges, but at least one other Forstmann Little investor has held conversations about a follow-on suit, should Connecticut prevail.
Connecticut is seeking “over $100 million” from Forstmann Little, which has denied all allegations.