SHAREHOLDER groups accused the American private equity industry of trying to steal public companies last night as the Department of Justice (DoJ) launched an inquiry into alleged cartel practices among the funds.

The New York branch of the DoJ has begun an inquiry into whether leading private equity funds have engaged in anticompetitive behaviour.

The department is understood to have sent letters to several buyout firms — thought to include Kohlberg, Kravis, Roberts and Silver Lake Partners — requesting information on deals and business practices. The department and both firms declined to comment.

The DoJ’s concerns are thought to include the possibility of collusion between private equity firms seeking to reduce the price they pay for a company by teaming up for “club” deals as well as potential conflicts of interest surrounding management buyouts.

Institutional investors are becoming increasingly sceptical about management-led buyouts — as distinct from those private equity deals not involving the target company’s executives — which they say pose significant conflicts of interest to the employee participants.

John Linehan, a portfolio manager at T. Rowe Price, a mutual fund with $300 billion (£160 billion) under management, said: “When managements team up with a private equity firm it has all sorts of incentives to go private at the lowest possible price, because this will increase their eventual payout. This is a conflict with their fiduciary duty to get best value for shareholders.

“I have chosen to speak out publicly about this because it is an issue of significant importance for us and could have a very significant impact. I am fed up with management trying to steal firms from under our noses. You often have to ask, why didn’t they do that for us?”

Mr Linehan opposes the latest bid for Cablevision by the founding Dolan family, announced on Monday, on the basis that it would shortchange shareholders.

Chris Young of Institutional Shareholder Services, an American advisory firm, said: “Institutions are telling us more and more of their concern that private equity firms appear to be grabbing assets cheaply, especially where management is involved.”

In a highly unusual stance, Harrah’s, the world’s biggest casino operator, will not comment on whether its top management would be involved if last week’s $26 billion private equity bid is approved by shareholders.

All parties declined to comment on Harrah’s bid.

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