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Swift Kick In Bottom Line For Private Equity Firm

One never knows where trouble can come from.


One never knows where trouble can come from. HM Capital, the Dallas-based private equity firm formerly known Hicks, Muse, Tate & Furst, finds itself staring at a lawsuit as 18 employees of one of the companies it had acquired, Swift Beef, charge both of them with wrongful conduct, among other things, for knowingly hiring illegal immigrants. The suit arises after U.S. immigration officials arrested 95% of the nearly 1,300 workers at Swift, claiming they violated federal immigration laws, and their removal caused a temporary shut down of the company. The swift closing of the meatpacker – which the p.e. firm bought in 2002 from ConAgra Foods for about $1.4 billion -- led to a drop in share price, which had a deleterious effect on the p.e. firm at least for the moment. Filed in U.S. District Court for the Northern District of Texas, the complaint alleges that hiring illegals at lower wages stiffened the competition for jobs at the company and kept salaries low. The plaintiffs’ beefs include common law fraud for "material false representations" regarding immigration status; civil conspiracy for its "effort to intentionally violate the immigration laws of the U.S."; and violations of the Racketeer Influenced and Corrupt Organizations Act for "managing an enterprise that grossly affected interstate commerce through a pattern of racketeering activity." So far, Swift has denied knowingly hiring illegal workers and the p.e. firm has called the court action, which seeks $23 million in damages, "a lawsuit without merit." Still, the case does illustrate the unforeseen circumstances that can accompany every deal.

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