Union questions Leonard Green private jet use

US hospitality union Unite Here has set its sights on Leonard Green & Partners for its use of private jet travel, questioning whether the firm has been transparent with investors about the allocation of expenses associated with its use of private jets.

The Unite Here report, published late last month, comes at a time when the US Securities and Exchange Commission is paying extra attention to private equity fees and expenses, with one oft-cited example being the use of private jets.

Leonard Green has three private jets registered with the Federal Aviation Administration (FAA), “despite having an investment staff of only 40 people,” Unite Here stated. Leonard Green updated its Form ADV in 2015 to state that in certain instances, the firm is reimbursed by a portfolio company for private class travel expenses.

Unite Here has been targeting Leonard Green for months in reports regarding their returns, talent retention and fees and expenses. Unite Here has been trying unsuccessfully for eight months to meet with Leonard Green regarding unionization of the Palms Casino Resort in Las Vegas, which the firm owns alongside TPG Capital, according to a source familiar with the matter. The author of the report, Michael Pineschi, stated that the goal of the report was to increase transparency for defined benefit plans.

For Leonard Green, Unite Here’s continued attention represents reputational risk and increased scrutiny of their policies, especially as the union reached out to LPs directly regarding the possible lack of transparency in how the firm expenses private jet travel. The firm is currently fundraising for Green Equity Investors VII.

Unite Here also sent LPs a draft letter template to send to Leonard Green, requesting a breakdown of expenses related to the maintenance and operation of the planes, travel itineraries, and billing specifying the relevant fund name and how the travel was expensed.

The report breaks down the firm’s 1,898 flights over the last three years, including private travel. The union estimates Leonard Green spent $4.62 million for at least 423 flights aboard its three planes last year, citing FAA data.

“We, Leonard Green & Partners, pay virtually all (98 percent last year) of the costs associated with private air travel. Our investors were charged nothing,” the firm said in a statement to pfm. The firm declined to comment further.

The report prompted LPs to reach out to Leonard Green and has spurred some LPs to have their consultants look into the matter, said Pineschi in a call with pfm.

Unite Here, which represents workers in food service, hospitality and other industries, has recently called out multiple private equity and private real estate firms on issues like their fee and expense policies and co-investment practices including TPG, LNK Partners, Lone Star Funds and AEW Capital.