Senator Warren, Colleagues Reintroduce Stop Wall Street Looting Act

Senator Elizabeth Warren (D-MA) and six Senate colleagues reintroduced the Stop Wall Street Looting Act, which would make private equity funds responsible for the debts of companies they acquire and control. The bill updates 2019 legislation (see prior coverage).

Title I would amend the Investment Company Act to make a controlling private fund, and those holding active interests in it, jointly and severally liable for the acquired company's debts. That includes government penalties, Worker Adjustment and Retraining Notification Act violations, and pension obligations. Limited partners who do not take part in management would be excluded.

Title II would bar an acquired company from making capital distributions for four years after a buyout, then cap them at 10 percent of its obligations. It would also (i) bar plant closings and mass layoffs that move the work outside the United States, (ii) lengthen to 15 years the clawback period for fraudulent transfers, and (iii) presume fraud for transfers tied to a change in control. Private funds receiving federal or state funds could not acquire companies or make shareholder distributions for two years. They would also have to publicly disclose how they used the money.

Title II's tax provisions would impose a surtax on fees and other payments portfolio companies make to the investment firms that control them, set so the combined tax takes the full payment. They would also change the business-interest deduction limit for portfolio companies whose debt exceeds their equity. Title IV would treat carried interest as ordinary income. The bill would further bar federal health payments to entities that sell assets to, or borrow against assets from, a real estate investment trust, and end the 20 percent pass-through deduction for REIT dividends.

Among the other sections, Title III would raise bankruptcy priority for unpaid wages from $10,000 to $20,000 per worker.