Thursday22 August 2019 ★ FINANCIAL TIMES 7

FT BIG READ. PRIVATE EQUITY

Marc Rowan and his protégé Imran Siddiqui invented what may be the slickest moneymaking machine on

Wall Street. Then they fell out, exposing a divide between the buyout pioneers and younger dealmakers.

By Mark Vandevelde and Sujeet Indap

something arguably more valuable than

the $300m it had sought. In riveting

detail, the arbitrator laid bare how Mr

Siddiqui had worked on his competing

venture with the surreptitious help of a

mid-level Apollo colleague.

Mr Dang was a rising star at Apollo.

He regularly pulled 100-hour weeks,

and left his phone on overnight so his

billionaire bosses could rouse him. Yet

he also found time to build Excel models

for Mr Siddiqui.The arbitrator found

that Mr Dang, who had never worked on

insurance deals at Apollo, accessed con-

fidential files belonging to the Apollo

team that was helping Athene bid for

AEL. Mr Cernich conceded it was a “stu-

pid and sophomoric” thing to do,

though the arbitrator found there was

no evidence that Mr Siddiqui was

involved or used the information.

Apollo failed to flip Mr Dang, who

resigned the day after his confrontation

with Mr Weideman and was ordered by

the arbitrator to pay Apollo $1m over

his wrongdoing.

Athenewalked away from AEL,

deciding a deal would be too expensive.

But Mr Siddiqui could not close a deal

for AEL either. The Apollo legal action

spooked his potential backers, accord-

ing to people familiar with the discus-

sions. Some believe that was the point.

For Mr Cernich, the Caldera co-

founder who is also being sued by

Athene, the case was never really about

confidential information. “It was about

the fact that we had the audacity to go

after Apollo’s income and would not

back down from its threats,” he says.

Who wins?

Apollo rejects this view entirely and the

arguments are still rattling around

courtrooms.Athene is suing Mr Sid-

diqui in Bermuda, claiming he violated

his legal duties to the company. Caldera

is suing Apollo, Athene and Mr Black in

New York, claiming that the Bermuda

lawsuit — and the arbitration action

before it — are “shams”, part of a cam-

paign of litigation and slander aimed at

suppressing competition. (The defend-

ants deny this; Apollo says it has “over-

whelmingly prevailed” in litigation

against Mr Siddiqui, and that calling its

claim a sham is “absurd”.)

Earlier this year two US-based Athene

shareholders took aim at the private

equity firm’s “extravagantly expensive”

fees, filing lawsuits against Apollo in

New York, only to drop the claims after

Athene persuaded a Bermuda court to

slap them with injunctions against pur-

suing their complaints in the US.

At Apollo, Mr Siddiqui’s former col-

leagues insist it could have ended differ-

ently if he had abandoned his secret col-

laboration with Mr Dang and respected

the peace treaty he struck when he set-

tled the first legal action at the begin-

ning of 2018. Some of Mr Siddiqui’s

allies call that fanciful, pointing out that

Apollo began litigating against his AEL

deal months before it knew one of its

employees was involved.

There have been no winners from the

dispute. Athene’s shares trade just

below their 2016 IPO price. The bloody

fight with Mr Siddiqui has cast unwel-

come attention on its controversial rela-

tionship with Apollo. Mr Siddiqui’s Cal-

dera is again looking for takeover tar-

gets, and financial backers.

In a conversation recorded in court

papers, Sorin Siddiqui surveyed the

mayhem unleashed by her husband’s

attempt to earn a second fortune in

insurance, and said: “He should have

just sat on the beach for a while.”

I

t was an offer Ming Dang was not

supposed to refuse. One afternoon

in October, the 30-year-old former

investment banker was escorted to

a private room for a meeting that

would alter the course of his career. First

to speak was Christian Weideman,

recently arrived on Wall Street after

working as a senior official in Barack

Obama’s Treasury department. He

delivered a blunt warning.

“We are lawyers for Apollo,” Mr Wei-

deman began, referring to one of the

world’s leading — and most aggressive —

private equity firms, where Mr Dang

also worked. “We don’t represent you.

Anything you tell us, we can use.”

The ambush exposed Mr Dang’s

divided loyalties in a messy power

struggle between two generations of

Wall Street fortune-makers. On one side

of the battle was Marc Rowan, co-

founder ofApollo Global Management,

who at 57 is old enough to have become a

multibillionaire from the leveraged

buyout revolution a generation ago. Pit-

ted against him: his erstwhile protégé

Imran Siddiqui, a man he regarded as

“brilliant and capable”, who earned

$20m a year in his early forties at Apollo

yet insisted he was worth far more.

The pairhad fallen out over one of the

most lucrative investments of the past

decade. During the financial crisis they

set up alife insurer, Athene Holding,

buying insurance policies at bargain

prices and moving billions of dollars of

customers’ retirement savings into

unconventional credit investments just

as markets bottomed.

Athene now pays enormous fees to

Apolloto manage its assets; analysts say

the insurance group has added $4bn to

the value of Apollo, nearly one-third of

its market capitalisation. It was a com-

plete reimagination of what a Wall

Street firm could become. The likes of

Blackstone founder Stephen Schwarz-

man and former Barclays boss Bob Dia-

mond have been trying to replicate it.

Yet this triumph has degenerated into

an ugly grudge match thatone rival pri-

vate equity executive likens to “a circu-

lar firing squad”. In particular, some

Athene shareholders have complained

about the insurer’s close ties to Apollo.

Mr Siddiqui quit Apollo when it

became clear that his rift with Mr

Rowan could not be repaired, only to

suffer damaging revelations thatset

back his own attemptto establish a rival

insurance venture. He faces a barrage of

litigation, which allies view as an

attempt by Apollo to sabotage a poten-

tial competitor.

This account, based on a dozen inter-

views with key insiders together with a

review of securities filings, court records

and other documents, reflects a genera-

tional divide that has riven the firms

that invented the alternative assets

industry four decades ago. It shows that

Apollo’s veteran founders, like their

counterparts atBlackstone,KKRand

Carlyle, are wrestling with how to groom

new leaders without giving up control —

bringing them into conflict with

younger executives behind Wall Street’s

latest moneymaking machines.

Mr Dang could only guess at any of

that as he sat in an Apollo conference

room and tried to explain away the pri-

vate emails that unmasked him as acol-

laborator in Mr Siddiqui’s new insur-

ance venture, which his employer,

Apollo, was trying to suppress.

“Do you know how long this will

take?” he asked.

Months later, an arbitrator would

conclude that Mr Dang’s account of his

internet start-ups andconsultancy,

before moving to Goldman Sachs. “The

rarest quality in junior people on Wall

Street is willingness to invent,” says a

person who supervised him there.

“Imran brought that to work every day.”

In his first five years at Apollo, Mr Sid-

diqui worked with Mr Rowan to buy

scraps of mispriced business from

major insurance companies, building

Athene into a company with enough

heft to be listed on the stock market.

In 2013 Apollo raised a new $18bn pri-

vate equity fund — and Mr Siddiqui saw

a chance to ask for more money. He also

made two unusual requests. Instead of a

bigger stake in Apollo or its funds, he

asked for a stake in Athene. And he

asked to borrow cash from Goldman

and Apollo, so he could double down

and buy even more Athene shares.

While Apollo, too, has a large equity

stake in Athene, which it says “creates a

close alignment” between the compa-

nies, the move potentially put Mr Sid-

diqui at odds with his employer over the

fees the firm extracted from the insurer.

The unorthodox pay package may

have widened a cultural gap between Mr

Siddiqui and some of his Apollo col-

leagues. He was a decade older than the

private equity firm’s typical recruits,

and some viewed him as aloof and arro-

gant. Unlike peers who usually had a

dozen or so deals at various stages of

development, he was spending most of

his time at Athene. Now, even as he

ascended to the rank of senior partner

with a slot on the Apollo Management

committee, Mr Siddiqui’s $78.5m stake

in Athene dwarfed his $20m holding of

Apollo’s shares and exceeded his partici-

pation in the firm’s private equity funds.

By mid-2015 Mr Siddiqui and Mr

Rowan were set on a collision course.

Threat of competition

A major bone of contention was the

position of Jim Belardi, who served as

Athene’s chief executive while owning a

5 per cent stake of the Apollo subsidiary

that charged fees for managing the

insurance company’s assets. In 2015, Mr

Siddiqui came close to replacing him

with respected MetLifeexecutive Bill

Wheeler. Mr Rowan called Mr Wheeler

“great window dressing for an Athene

IPO and perhaps... also a great execu-

tive” but took exception to what he saw

as a secretive hiring process. (Mr

Wheeler eventually took the role of

“president” which Athene says was

“always intended”, calling his role “criti-

cal and influential”.)

In late 2015, Mr Siddiqui and others

who worked closely with Athene felt he

was being sidelined from his role at the

insurer. Mr Rowan disputed this and

stated in sworn testimony that “Mr Sid-

diqui was fully operational with respect

to Athene through the day he left”. Still,

by the time Mr Siddiqui departed in

2017, his relationship with Mr Rowan

was so broken that, unlike Apollo co-

founders Leon Black and Josh Harris,

the man who had been his closest men-

tor did not stop by to say farewell.

Unbeknown to Apollo, Mr Siddiqui

was already working on a new venture.

Caldera Holdings would compete with

Athene, but instead of being captive to a

private equity firm it would invest poli-

cyholders’ money in fixed-income port-

folios operated run by low-fee asset

managers such as BlackRock, according

to people familiar with his plans.

The problem was that Mr Siddiqui had

signed a non-compete clause. In January

2018, Apollo started legal action. The

case was settled. Mr Siddiqui’s lawyer,

Lisa Solbakken, stated that Caldera,

which was incorporated in Bermuda last

July, “was neither founded nor operating

until well after Siddiqui’s departure”. Mr

Siddiqui gave up $15m of Apollo-related

assets as part of the settlement.

Now free to compete, Mr Siddiqui

wanted to kick-start his new venture by

acquiring a listed life insurer named

American Equity Investment Life

(AEL), which was also an Athene target.

With his Caldera co-founder Stephen

Cernich, a former Athene executive, he

began drumming up money for a bid.

In May last year, Apollo sued again,

this time accusing Mr Siddiqui of misus-

ing the firm’s confidential information.

Mr Rowan told colleagues that he could

not see how else Caldera could have

mastered the complexity of bidding for

a listed insurer so soon after Mr Siddiqui

left Apollo. A New York arbitrator

rejected that argument, suggesting

Apollo should not have settled with Mr

Siddiqui if it did not want him to com-

pete. While castigating him for falsely

stating he had destroyed confidential

documents as required, the arbitrator

found no evidence that Mr Siddiqui

used confidential information obtained

from Apollo or Athene.

Apollo lost its principal claim against

Mr Siddiqui, and was awarded $150,

against him in punitive damages on

other claims, but the firm obtained

two-timing “reflected a lack of a moral

compass”. But for now he had a job, and

a prospect that he could keep it, if he

spilled everything he knew and agreed

to testify for Apollo against Mr Siddiqui.

“Is this something we can resched-

ule?” Mr Dang suggested. “Unfortu-

nately not,” Mr Weideman replied.

Inventive approach

Mr Siddiqui left Apollo convinced that

insurancewas an industry where light-

ning could strike twice. Long before

Athene, his mentor Mr Rowan scored an

early success with Executive Life, a Cali-

fornia insurance company that col-

lapsed in 1991 after buying billions of

dollars of junk bonds from investment

bank Drexel Burnham Lambert.

Now regarded as one of the sharpest

minds on Wall Street, Mr Rowan started

at Drexel at the height of the junk bond

boom after graduating from the Whar-

ton School. Several of the bank’s top

executives were at that time perpetrat-

ing one of the most notorious financial

crimes in American history. “I worked

directly for Dennis Levine, who went to

jail,” Mr Rowan once said, summarising

his early career. “I then went to work for

Marty Siegel, who also went to jail. I

then moved out to California to work for

Mike Milken, who also went to jail.”

When junk bond prices collapsed, Mr

Rowan was out of a job and Executive

Life was out of business, decimating the

savings of some pensioners. ButApollo,

founded in 1990 by several Drexel veter-

ans including Mr Rowan, discovered a

silver lining. When regulators organised

a fire sale of the bonds the Drexel team

had sold to Executive Life, Apollo was

an enthusiastic buyer. The firm report-

edly made large profits.

Debt markets were again convulsed

by financial crisis when Apollo poached

Mr Siddiqui in 2008 from a smaller pri-

vate equity firm. He graduated from

Harvard Law School after stints in

Former Apollo partner Imran Siddiqui, left, once enjoyed a good relationship with co-founder Marc Rowan, right. But Mr Siddiqui started working on a new venture, Caldera Holdings, while still at the firm— FT montage

‘The rarest quality in

junior people on Wall

Street is a willingness to

invent. Imran brought

that to work every day’

‘It was about the fact that

we had the audacity to go

after Apollo’s income and

would not back down

from its threats’

The generational feud

that rocked Apollo

Apollo prospers while Athene

trades below its IPO price

Share prices, rebased (Dec   )







  

Apollo Global

Management

Athene Holding

Source: Refinitiv

A dispute arose

overtheposition

of Jim Belardi,

the Athene CEO

seen below at its

2016 IPO. Imran

Siddiqui wanted

to hire MetLife’s

Bill Wheeler for

the role

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