Carlyle Pays New York $20 Million, Riverstone Pays $30 Million… Why the Difference?

This morning’s news that Riverstone Holdings will pay $30 million to the New York State Common Fund left me a bit puzzled. Just a few weeks ago, Riverstone’s partner, The Carlyle Group, paid the pension fund $20 million for its role in the same kickback scandal.

Setting aside the message this “settlement” system sends (buy your way out of trouble!), why does The Carlyle Group get to pay $10 million less than Riverstone? Is Carlyle a less bad actor? Are the $20 million and $30 million totally arbitrary?

As it turns out, no. The $30 million and $20 million settlement fees represent the management fees New York State Common paid to each firm for the three funds alleged to have received commitments via a pay-to-play scheme. The firms managed to bill their investors with perfectly round numbers, it seems.

The funds in question are jointly managed by Carlyle Group and Riverstone, but Riverstone seems to have received a larger chunk of the fees. The funds are Carlyle/Riverstone Global Energy & Power Fund II, Carlyle/Riverstone Global Energy & Power Fund III, and Carlyle/Riverstone Renewable Energy Infrastructure Fund I.

Notably, New York State Common has committed to subsequent Riverstone funds, which happen to bill the Riverstone name first. Those efforts include a fourth Global Energy & Power fund and a second Renewable Energy Infrastructure fund. New York will honor its investments, including fees, in these funds. However, I’m guessing that if Riverstone head David Leuschen is personally charged and found guilty (Cuomo didn’t rule it out today), it’d trigger a key man provision that will give investors a chance to question the firm’s leadership.