Bain Capital Partners LLC and an insurance business technology company it controls were accused in a lawsuit of acting in bad faith when engineering the acquisition of an insurance software developer.
Artizan Internet Services LLC principal Richard Roy accused Bain and University Park, Illinois-based Applied Systems Inc. of persuading him and his equity holders to sell the business last year for less than they could have gotten from other possible buyers. Bain and Applied systems caused Roy and the other partners to be ousted after promising them they could stay and earn at least $5 million more in performance bonuses over five years, according to the complaint.
Former Applied Systems Chairman James P. Kellner is also a defendant in the lawsuit filed yesterday in state court in Chicago.
“Bain, Applied and Mr. Kellner, by separating Mr. Roy and his fellow equity holders from Applied after only a brief tenure, essentially purchased Artizan for a substantial discount because the performance payments will never be made,” according to the complaint.
While the final sale price isn’t stated in the complaint, Roy said he was told by Kellner that the transaction had a potential economic value of $22 million. Roy seeks at least $5 million in damages. The acquisition was announced in March 2011.
Alex Stanton, a spokesman for Boston-based Bain, didn’t immediately respond to a voice-mail message after regular business hours seeking comment on the complaint. The private-equity firm is accused in the complaint of unjust enrichment and interference with contract rights.
Kellner, who is accused of fraudulent inducement, declined to comment on the allegations.
Former Massachusetts Governor Mitt Romney, the Republican Party nominee defeated in his bid to become U.S. president on Nov. 6, was Bain’s co-founder and served as its chief executive officer from May 1992 to February 1999.
The case is Roy v. Kellner, 12L13105, Cook County, Illinois, Circuit Court, Law Division (Chicago).