Where’s My $45 Million, Manager Asks

DALLAS (CN) - A former managing director claims in court that private equity firm American Capital owes him $45 million in stock and options.

Kevin W. Kuykendall of Dallas sued American Capital fka American Capital Strategies, its senior managing director Darin Winn and CEO Malon Wilkus, in Dallas County Court.

Kuykendall claims he's worked for American Capital since 2003, as a managing director since 2007, and worked on transactions that brought in "hundreds of millions of dollars" in profits.

"In addition to the bi-monthly salary, quarterly and annual bonuses, and quarterly and annual awards of stock and stock options, ACAS was obligated to award Mr. Kuykendall ACAS stock and stock options equal to 4.0 percent of ACAS' capital gains generate from transactions led by Mr. Kuykendall," the complaint states.

"For a time, the parties performed their respective obligations under the employment agreement. Mr. Kuykendall excelled at his work, generating hundreds of millions of dollars in profits for ACAS, and was handsomely rewarded for his efforts."

Kuykendall claims that in May 2008 he concluded the most successful equity investment in the firm's history.

"The BP West deal alone netted ACAS a capital gain of approximately $145.8 million," the complaint states. "The same year, ACAS received an escrow payment of approximately $1.14 million stemming from its investment in Consolidated Utility Services, that should have paid Mr. Kuykendall approximately $46,000 in ACAS stock and options. In April 2010, ACAS received an additional escrow payment of approximately $1.6 million in connection with the BP west deal, which should have resulted in ACAS paying Mr. Kuykendall approximately $64,000 in ACAS stock and options. Finally, in August 2010, ACAS sold Innova Electronics, which resulted in a capital gain of approximately $22.7 million, and a payment to Mr. Kuykendall of approximately $909,000."

But Kuykendall claims that rather than pay him the stock and options to which he was entitled by contract, the company kept virtually all of the profit for itself, despite repeated promises from Winn and Wilkus that the money was coming.

Had hw known this treatment was coming, Kuykendall says, he would have exercised his rights on the first date on which his vested shares and options had significant positive value: that he would have earned more than $28.6 million in vested shares and options and another $16.8 million in unvested shares and options.

"With the benefit of hindsight, it is now clear that ACAS, Mr. Winn and Mr. Wilkes had no intention of ever paying Mr. Kuykendall the promised - and contractually owed - ACAS stock, and intentionally misled Mr. Kuykendall to induce him to remain at ACAS and not bring suit for the amounts plainly owed to him under the employment agreement," the complaint states.

"Having been repeatedly lied to and denied the benefit of his bargain, Mr. Kuykendall has been left with no recourse other than to bring this suit."

American Capitals, based in Bethesda, Md., is an equity partner in management and employee-led buyouts, provides mezzanine and senior debt financing for buyouts led by private equity firms and provides capital directly to private and public companies, according to its website. It claims to manage more than $18.6 billion in assets and employs more than 90 investment professionals in eight offices in the United States and Europe.

Kuykendall seeks compensatory damages for fraud, breach of contract and conversion.

He is represented by Jeffrey Tillotson with Lynn Tillotson of Dallas.

Follow @davejourno

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