Commerce Secretary Wilbur L. Ross and the firm he founded were sued by three of his former colleagues who say WL Ross & Co. pocketed management fees from the general partnerships that handled its private-equity investments, the Wall Street Journal reported today. The lawsuit, filed yesterday in New York State court, claims that WL Ross covertly took management fees from general partner entities that the investment firm was only allowed to charge to passive, outside investors. David Storper, David Wax and Pamela Wilson said in the lawsuit they were required to invest their own money in return for stakes in those general partnerships, which they retained after leaving the firm. They said that their partnership interests were a “significant part” of their compensation packages but were diluted when the firm took fees it wasn’t entitled to. “These charges are barred by the limited partnership agreements governing the private-equity funds,” the lawsuit said. “The agreements allow management fees to be charged to fund investors, not the general partners.” The plaintiffs claim WL Ross reaped at least $48 million in management fees from the general partnerships that were “completely concealed” until the firm disclosed them on capital statements last year.
