Tuesday, 25 October 2016
Last updated 3 hours ago
May 7 2010 | 3:27am ET
Greenlight Capital has won another victory over private equity firm Allied Capital Corp., as a former Allied portfolio company has settled charges that it defied federal regulations.
The New York hedge fund had sued Business Loan Center, now called Ciena Capital, and its parent, Business Loan Express, accusing the business lender of certifying that it complied with Small Business Administration Rules when it, in fact, did not. Greenlight and its co-plaintiff, James Brickman, brought a so-called whistleblower suit against Ciena, which allows private citizens and companies to sue on behalf of the U.S. government.
Greenlight and Brickman will split $4.3 million of the $26.3 million settlement, which also resolves Greenlight’s demand that Allied Capital be held accountable for Ciena’s wrongdoing.
Ciena’s failure to heed the SBA rules emerged after several federally-backed loans the firm made and serviced defaulted. One of its former executives has been sentenced to 10 years in prison for his role in the fraud.
The settlement still requires the approval of a federal bankruptcy judge, who will hold a hearing next month.