TPG China deal embroiled in scandal

Former managers of Nissin Leasing allegedly prevented the buyout firm access and hid the company's seal, as it tried to replace the CEO. The $275m deal, completed in February, may reportedly be written down to zero.

TPG portfolio company Nissin Leasing has said it has been the subject of extortion threats and false allegations by disgruntled former chief executive Chen Yunwei.

In December 2007, TPG agreed to purchase up to ¥20 billion of shares and stock warrants in NIS Group as well as invest $102.5 million to acquire 50 percent of NIS’s Chinese subsidiary Nissin Leasing. TPG currently holds a 60 percent stake in Nissin Leasing.

But TPG and Nissin Leasing staff were at odds on issues including the fees TPG charged the company and as a result, in July, the NIS board of directors decided to replace Chen with TPG executive Steven Schneider, according to the Financial Times.

Nissin Leasing alleges that Chen tried to block TPG staff from entering company premises, which resulted in TPG calling the police to gain access. Consequently, the employment of Chen and her “co-conspirators” was terminated and they were removed from the company’s offices, the company said in a statement.

Chen allegedly hid certain books and records of the company, including official legal documents and the company seal needed to conduct business in China. The company has also accused her of giving loans that violated company policies and issuing cars to employees without authorisation.

Chen has said she was removed from her position without proper board notification, the Financial Times reported.

The dispute is currently in arbitration and the company is now being run by authorised representatives of the owners and board of directors, Nissin said.

People familiar with the matter told the Financial Times the deal may have to be written down to zero.

TPG's fourth Asian fund closed on $4.2 billion in June 2008. The Asia-focused buyout fund invests between $100 million to $400 million per deal across all sectors except in the greenfield and real estate sectors.

TPG declined comment while Nissin Leasing did not return requests for comment.