Sarah A. Bradley, co-founder of middle-market private equity firm Kainos Capital, sued the firm as well as her fellow co-founders, Andrew Rosen, Robert Sperry and David Knickel, claiming fraud, breaches of fiduciary duty and seeking millions of dollars in damages, according to the complaint and a statement by her lawyers at Reid Collins & Tsai.
The complaint filed in the Delaware Chancery Court on Jan. 25 also seeks the return of Ms. Bradley's 25% interest in Kainos.
The complaint alleges that Kainos, formed in 2011, is the successor to private equity firm Hicks, Muse, Tate & Furst, whose reputation was damaged by a pay-to-play scandal involving state pension funds in the U.S.
After Kainos launched its first fund, the complaint alleges that Mr. Rosen "began a power grab inside Kainos" and excluded Ms. Bradley from the decision-making process while taking control of accounting, management and compensation at the firm.
"Rosen also began evolving the culture into one of forced overconsumption of alcohol and general debauchery, coupled with shaming and coercion if anyone tried to push back," the complaint alleges.
The complaint alleges that Kainos and the other co-founders defrauded Ms. Bradley out of her 25% ownership in the firm in part by converting the firm into a limited partnership.
"Ms. Bradley's complaint lacks merit and its allegations are false. This is a financial dispute over something that happened nearly three years ago, and Ms. Bradley has been well aware that her ownership was reduced," according to a written statement by a Kainos spokesman. "Kainos has provided tremendous opportunities to its employees and partners, including Ms. Bradley, and, more importantly, has maintained an unrelenting focus on delivering results to its investors while upholding the highest standards of integrity in business. The Kainos team will not be influenced by improper litigation tactics, and we intend to defend ourselves vigorously in this matter."