Washington DC-based Allied Capital, a publicly traded provider of equity investments and loans to private companies, is the target of a criminal investigation launched by the District of Columbia US Attorney.
The investigation, revealed in an Allied Capital press release, relates to one of the firm’s portfolio companies, Business Loan Express. Allied Capital said in the statement the probe is “similar to those allegations made by short sellers over the past two and one-half years.”
In June, the SEC launched its own probe of Business Loan Express, which is Allied Capital’s largest holding. At issue is the transfer of loans valued by the firm at $9 million from Business Loan Express to Allied Capital’s own balance sheet. Short sellers and critical analysts have complained that the valuation was arbitrary and the transfer not properly disclosed. Allied Capital has denied any wrongdoing.
This week’s press release states that the US Attorney’s office has requested the preservation and production of information related to Business Loan Express. Allied Capital, legally known as a “business development company,” saw its share price drop nearly 10 percent on news of the probe.
Earlier this year, a number of private equity firms sought to take public business development companies of their own, but only a few, notably Apollo Management, succeeded at bringing vehicles to initial public offerings.