Railroad Alleges Nepotism Scheme by Private Equity Investor (1)

American Rail Partners LLC, which operates two short-line railroads through its subsidiary RailUSA, hit part-owner International Rail Partners LLC and a group of private equity affiliates with a Delaware lawsuit claiming they used a management agreement to “plunder” the company.

IRP’s CEO treated ARP “as a bottomless well of cash,” handed out “patronage-like jobs” to friends, “grossly overpaid” family members for doing “jobs with no discernible responsibilities,” had employees “run personal errands” on the clock, and made personal purchases with company assets, the Chancery Court complaint says.

In addition to IRP, which owns about a third of ARP, the lawsuit ...