The Carlyle Group has reportedly filed suit in Hong Kong against former business partner Neil Shen, now managing partner of the Chinese branch of venture capital firm Sequoia Capital, for allegedly backdating an investment agreement, the Wall Street Journal reported.
The buyout firm’s lawsuit accuses Shen of backdating an $11 million investment agreement with Chinese medical research company Green Villa Holdings to four days before the company signed a $10 million investment contract with Carlyle. The backdated agreement put in place conditions which would potentially enable Sequoia to increase its 25% stake in the company to 38% for a total investment of $28 million. The amended agreement allegedly led Green Villa's majority owner, Ren Jun – who is said to be a school friend of Shen – to write to Carlyle and pull out of his contract with the firm.
Carlyle is seeking $206 million in damages, a sum that represents the estimated profit the deal would have made for the firm based on an exit in 2011.
Carlyle's relationship with Shen dates from its earliest days in China, when it successfully backed Nasdaq-listed Ctrip.com International Ltd, an online flight agency founded by Shen.
Sequoia Capital could not be immediately reached for comment. Carlyle confirmed the story was true, but declined to comment further.