Platinum Equity sued for sexual conduct

There is no question that executives at Platinum Equity won’t back down from a fight. The Beverly Hills–based buyout firm, which is willing to purchase sick companies in ailing industries, this spring bought the Union-Tribune for a lowball price of around $50 million. Now Platinum is fighting to take over the bankrupt auto-parts maker Delphi Corporation, with little money down and with help from General Motors and the federal government. Delphi’s creditors, who will get 20 cents on the dollar, charge in New York bankruptcy court that it is a sweetheart deal, but Platinum seems to relish a bruising scrum.

However, Platinum does not relish media coverage of two lawsuits filed by former Platinum employees — a male bodyguard and two female workers — that accused the company and some executives of fostering a sexually charged atmosphere and hostile environment for women.

The suits have been mentioned by CNBC, the Reader, and the Los Angeles Times, and Platinum has taken pains to denounce the charges and the lawyer who brought the suits.

Platinum is headed by 44-year-old Tom Gores, who is worth $2 billion, according to Forbes magazine, which lists him 334th among the world’s billionaires. A Christian of Lebanese and Greek descent who was born in Israel, Gores grew up near Flint, Michigan, worked in his family’s grocery stores, graduated from Michigan State University with a BA in real estate finance, and worked for his older brother Alec in the takeover business before going out on his own. In September of last year, when the economy and stock market were on the edge of the abyss, Gores was able to raise $2.75 billion from pension funds and other investors to be used in further attempted healings of frail and suffering companies.

Just recently, a Platinum executive declared that the company was looking into buying more newspaper and automotive-related enterprises. The stock market has slaughtered such entities. Platinum is willing to thumb its nose at the market’s judgment; Gores is going to go down as a miracle worker or an unsuccessful bottom-feeder.

But Platinum has a cushion. It doesn’t put much money into a deal — witness the Union-Tribune transaction. Now it wants to plunk down a mere $250 million in cash and $250 million in a credit line to gain control of Delphi, which has been in bankruptcy for almost four years. General Motors, which was once Delphi’s parent, says it will put in more than $3 billion, including certain obligations. The federal government owns 60 percent of General Motors, so taxpayers are picking up part of the tab, complain critics. They charge that the deal was secretly sewn together by General Motors, Platinum, and President Obama’s automotive task force.

Dennis Kneale, a host on business/finance TV network CNBC, questions the deal, and in a commentary on June 18, he attacked the terms. He also discussed the two lawsuits, both of which were ultimately dismissed, one under unknown circumstances. The suits contained allegations of improper sexual conduct. Kneale rattled off the charges: female employees having affairs with executives, being hired for their looks, being pressed to have sex, and then getting paid to shut up, and other similar malefactions. Kneale mentioned the allegation that Tom Gores had an affair with his brother’s then-wife, widely publicized in last year’s Anthony Pellicano private-eye case that captivated Los Angeles.

Not long after his commentary, Kneale got a letter from Eva Kalawski, Platinum’s in-house attorney, who told him that wealthy individuals and successful companies often are hit with suits full of “unfounded allegations.” In his commentary of June 21, Kneale continued to attack the Delphi deal and then spoke of Kalawski’s concerns.

The Reader retrieved the two lawsuits, along with lengthy interrogatories and related filings. One suit was filed in 2007 by a former Gores bodyguard, Martin Nielsen, who used the pseudonym John Doe. His lawsuit protested his firing, alleging that his employment was wrongfully terminated after he was pressured to sign what he felt was an unlawful employment agreement.

The court said he should identify himself, and he amended his complaint to state his real name and added allegations that Lavely & Singer, Platinum’s law firm, called in a court memo “scandalous, irrelevant, personal and private information about people not parties to this litigation.” The memo continued, “For example, plaintiff mentions Tom Gores’ personal life and his relations with his wife and others, even though none of those allegations concern[s] the substance of plaintiff’s claims that a revised employment agreement he was requested to sign allegedly violated provisions of the Labor Code.”

There were several allegations of sexual improprieties. At Platinum’s request, the court struck them from the complaint because they were deemed not relevant to the claims. The court did not rule on whether the allegations were true.

The judge dismissed the suit on December 14, 2007, finding that the employment agreement the guard was asked to sign was not invalid or a violation of law and he was an at-will employee.

The other lawsuit (actually two suits that were consolidated into one) was filed in 2006 by two women using the pseudonym Jane Doe. Their names can be found in the court records.

This suit alleged that Platinum Equity “creates and tolerates a persistent, and pervasively sexually charged and hostile environment for women.” Moreover, “Sexual favors, the demand for sexual gratification and the payment of favors and ‘hush’ money are fixed policy and practice among PE [Platinum Equity] executives.”

The complaint alleged that Platinum executives “show favoritism towards female employees who consent to the employer’s sexual advances by rewarding them with money, gifts and travel, [meanwhile] promoting or rewarding women based on appearance and submission to sexual advances by PE executives, and financially supporting former employees to keep them quiet.”

Further, the company “intimidates, coerces or terminates female employees if they question or refuse to go along with the sexually charged atmosphere,” the Jane Doe suit alleged. It claimed that Gores and his top lieutenants had affairs with female employees and accompanied female assistants to strip clubs. One of the plaintiffs charged that one executive “constantly made sexually charged comments at work such as, ‘Hey, do you want to see what’s in a man’s underwear?’ and ‘What do you say my hot dog goes between your buns?’ ”

In a filing on September 6, 2006, Martin Singer, cofounder of Lavely & Singer, said he had engaged in “extensive settlement discussions” with the plaintiffs’ lawyer and they had exchanged “various drafts of a proposed settlement agreement.” The discussions ended after the plaintiffs’ lawyer wanted a settlement “with both plaintiffs simultaneously, rather than separately,” said Singer. The plaintiffs voluntarily dismissed the case on October 23, 2006.

Asked if the case was dismissed because Platinum had reached a settlement with the two women, Singer refused to say, instead responding that “the manner of dismissal was confidential.”

In the lawsuit, and in a letter sent to the Reader by a Platinum outside attorney (see accompanying article), Platinum vehemently denied the allegations of wrongdoing. The letter from Platinum’s attorney pointed out that the allegations were not proved.

Mark Barnhill, a Platinum principal, responded to Reader queries with a written quote similar to what Platinum attorney Eva Kalawski gave to Dennis Kneale: “Successful companies often become targets for gratuitous lawsuits filled with unfounded allegations. Platinum has not been immune. Fortunately, we have only had to deal with a handful of these in our 14 years of operation.”

Both suits were filed by San Francisco lawyer David Mattingly. Platinum doesn’t disguise its contempt for him. In an April 25, 2007 court filing, William Briggs II, an attorney with the Lavely & Singer law firm, wrote, “This case arises from the misguided hubris of plaintiff and his counsel who apparently believe that they can harass and embarrass the defendant into a settlement. The plaintiff, who hides behind the fictional moniker of John Doe, has run to a notorious attorney who is known to fabricate sham claims in an attempt to extract large legal settlements.”

Mattingly, who was phoned three times and also sent an email with questions, would only say, “Some day I will help you. I can’t help you now.”