Robert F. Smith — the billionaire who stunned Morehouse College graduates this spring by telling them he would pay off all their student debt — has been slapped with an explosive lawsuit that accuses his buyout fund of self-dealing.
Smith’s fund Vista Equity Partners used automotive software firm Solera Holdings as a “personal piggy bank” to bail out the fund’s flopped investments in other companies, according to the suit.
Reps for Vista Equity declined to comment on the suit against Smith, who is America’s richest African-American with a net worth estimated by Forbes at $5 billion.
Smith, who has served as chairman of Carnegie Hall since 2016, is married to Hope Dworaczyk, Playboy’s 2010 Playmate of the Year. The pair got hitched in a lavish ceremony off of Italy’s Amalfi Coast, with John Legend, Seal and DJ Cassidy performing.
Earlier this month, Vista raised a record-breaking $16 billion for its new tech fund. New York’s state pension is one of his biggest investors and has committed $750 million to the new fund.
The legal salvo was filed in California state court this week by Kurt Lauk, a former top executive at Audi and a current advisor to German Chancellor Angela Merkel, who says he got booted from Solera’s board when he raised red flags about Vista’s alleged self-dealing.
Lauk’s suit claims that Solera, which was acquired by Vista in early 2016, arranged about a year later to buy Lytx, a driver-safety tech firm, for $1.1 billion. But Vista’s board reps including Smith allegedly blocked the purchase, insisting Lytx was only worth $800 million. Lytx was later valued at $1.7 billion by investors, according to the suit.
Meanwhile, the suit says Vista tried to force Solera to buy Omnitracs, a “failing” competitor to Lytx that Vista had acquired in 2013 and had been struggling to sell.
“Vista and Smith were hoping to pawn off Omnitracs on Solera by using Solera’s money to bail them out of an unsuccessful and poorly run acquisition, and bury it inside Solera’s portfolio,” the suit alleges.
Solera did not, in the end, buy Omnitracs.
“Vista and Smith never had a “growth” plan for Solera as represented,” the suit alleged. “Rather, Vista and Smith had the opposite goal for Solera, namely, to use it to bleed millions of dollars their direction.”
The suit goes on to accuse Vista of misleading its own investors. In the case of Solera, investors included Goldman Sachs and Koch Industries, the suit alleges.
“Smith claims neither he nor Vista has ever lost money in an investment so as to lure additional unsuspecting investors into Vista,” according to the suit.
But one of Vista’s investments, which the suit doesn’t name, generated about $50 million in cash flow when Vista bought it, only to see that figure reduced to zero after Vista acquired it, the suit alleges.
“Smith is hiding these losses and when those that know, speak up – like Dr. Lauk – Smith tries to discredit or terminate them,” the suit said.
When Lauk asked Solera’s board to investigate Vista’s “alleged illegal conduct,” Vista fired him to block the probe, according to the suit.