American private equity giant likely ensnared in Gary Ng's loan fraud

Big name PE firm caught by rudimentary fraud!
OPM 2 min read

I really should have figured this on my own, but it is likely that the lenders who were the victims of Gary Ng’s fraud were also the eventual “acquirers” of PI Financial - $40b private equity firm H.I.G. Capital and RCM Capital Management.

H.I.G Capital was founded in 1993 by a former Blackstone MD and a Bain partner. The firm is active mostly in the middle-market space. Based in Miami, they have offices from Boston to Bogota. They’re big. Just in the past few months, they have raised two billion-dollar funds. Their lending platform is called WhiteHorse, that might be the actual entity involved in the original loan, which was $80m out of Gary Ng’s $100m purchase of PI Financial. RCM, aka RC Morris, lent a total of $60m (assuming I am right that they were the second lender).

The wording of the press release announcing the “sale” of PI Financial by itself provides some clues:

Pursuant to a definitive agreement, H.I.G. Capital and RCM Capital Management will assume ownership from Ng Group of Companies.

The “assume ownership” wording would be consistent with not having to outlay money for the purchase, ie swapping the troubled loans for Gary Ng’s ownership of the firm.

There was also this suspicious statement in that press release by an MD at H.I.G. Capital:

We are committed backers of PI, and are thrilled to become involved with this outstanding investment firm” said John Yeager.

With all due respect to PI, “thrilled” is too strong a word. That H.I.G. backed into owning PI, because a loan went bad is a far more plausible explanation why such a prestigious firm is suddenly the owner of a boutique brokerage firm in Vancouver.

The third lender, I have lower confidence on who that is, but it might be Bridging Finance, a Toronto-based lender. Gary Ng was reported to own 50% of that firm.

In total, $172m was lent. By way of comparison, Canaccord has a market cap of $950m.

Gary has said:

I’m a very proud Winnipegger. I have worked all over the world — in Hong Kong, Singapore, London, Germany — but I always come back to Winnipeg.

His parents also have ties to the Bahamas. That might all be useful information in the eventuality of a bail hearing, if it ever comes to that. Gary Ng also has extravagant tastes in cars and in sushi:

You can read my previous post on the fraud here.

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