Texas showdown over open records

The attorney general of Texas, Greg Abbott, today gave a speech in which he called for more ‘openness’ from private investment funds. Abbott recently ruled that portfolio company information may be made public if the sponsor private equity firm has received money from a Texas public institution.

Greg Abbott, the attorney general of Texas, today gave a speech in which he called for “openness” with regard to private firms that have received public money.

The comments were made before a luncheon sponsored by the Freedom of Information Foundation of Texas.

“In the aftermath of vast corporate scandals, it is imperative that we balance a private investment firm’s right to certain confidentiality in its financial dealings with the public’s right to know how that firm is managing the public’s dollars,” he said in the speech, according to a press release.

In July, Abbott, who runs the state’s open-records programme, ruled that a private equity fund, Texas Growth Fund, must reveal certain details of its portfolio companies that had been requested by a newspaper.

The ruling stated that Texas Growth Fund and its portfolio companies failed to prove that disclosure would cause harm to their respective businesses. It read: “[W]e find that none of the third parties has provided specific factual evidence to support the allegation that release of the information relating to its interests would cause the third party substantial competitive injury.”

Abbott’s office is being sued by Texas Growth Fund to overturn the ruling.

Carl Metzger, a partner at Boston law firm Testa, Hurwitz & Thiebeault, said private equity firms have on many occasions received requests for portfolio-level information, but the Abbott ruling “is the first time a state agency has made an initial determination that some portfolio company information may have to be disclosed under state open records law.'

Private equity funds backed by public money have been required to release fund-level performance data, and many industry participants have hoped that disclosure requirements would stop there.

Some private equity firms have already vowed never to take capital commitments from a public Texas entity if the Abbott ruling stands.

In his comments to the luncheon crowd, Abbott called the suit brought against his office by Texas Growth Fund a “first-of-its-kind” case that will “determine what level of scrutiny the public can expect with regard to the investment of its money by private companies. We are talking about tens of billions of dollars, much of it retirement income of public employees.”