Report: Cerberus COO faces ¥53bn Japanese lawsuit

Mark Neporent is alleged to have violated fidcuiary dutites at Kokusai Kogyo, a Cerberus-controlled JV. Cerberus has called the suit a means to pressure it to sell its stake.

An investment partner of Cerberus Capital Management is suing Cerberus’ chief operating officer, Mark Neporent, alongside two former Cerberus-appointed directors of its Japanese joint venture, Kokusai Kogyo (KK).

Cerberus acquired a controlling stake in [KK] when the company was on the brink of bankruptcy and returned it to profitability.

Cerberus statement

Cerberus controls a 55 percent stake in KK – a company well known for its hotels including the Royal Hawaiian in Honolulu – while Tokyo-based sustainable infrastructure and urban development firm Kokusai Kogyo Holdings (KKH) owns the balance. The partnership was struck in 2004.

Royal Hawaiian: KK-owned

Alleging the three “violated their fiduciary duties”, KKH is seeking ¥52.6 billion ($560 million) in damages through a lawsuit filed against Neporent and Kazuhiko Kawai and Toshikiyo Shimuzu, both ex-directors of the transportation, hotels and real estate company, the Financial Times reported.

“The defendants allowed Cerberus to drain KK’s corporate value by selling away its valuable assets and [imposing] unnecessary refinancing and other expenses on KK group,” KKH says in the suit.

The allegations centre around debts owed to Cerberus, which Kawai and Shimuzu allegedly led KK to replace with a ¥200 billion loan from Wachovia at a “much higher rate”.

KKH also claims that the same three defendants influenced the sale of KK’s 33.2 percent stake in the Imperial Hotel in Tokyo to Mitsui Fudosan, “even though KKH says that there was another prospective buyer who offered a higher price”, the UK daily newspaper reported.

In addition, KKH alleges that the defendants used the proceeds of that sale to redeem preferred shares issued to Cerberus when they could have used the proceeds to repay debts.

Cerberus has refuted the claims, saying the lawsuit is meant to pressure the private equity firm into selling its stake in the JV to KK’s founding family, Reuters reported.

“This lawsuit is entirely without merit,” Cerberus said in an e-mailed statement to the news wire. “Cerberus acquired a controlling stake in (KK) when the company was on the brink of bankruptcy and returned it to profitability.”

Neporent, an attorney by profession, joined Cerberus in 1998 after a period as a partner in the business reorganisation and finance group of New York-based law firm Schulte Roth & Zabel. He is has held board member places at AMC Financial Holdings, Exco Holdings, GMAC and MCI.

Other investments made by Cerberus in Japan include a controlling stake in Tokyo-based Aozora Bank and a 32.4 percent stake in Tokorozawa-based railways company Seibu Holdings.