bloomberg | Alex Slusky was under pressure to put the money in his private-equity fund to work.
The
San Francisco technology financier had raised $1.2 billion in 2007 to
buy and turn around struggling software companies. By 2012, investors
including Harvard University were upset that about half the money hadn’t
been used, according to three people with direct knowledge of the
situation.
Three Americans on the Caribbean island of St. Croix
presented a solution. They had built a network of payday-lending
websites, using corporations set up in Belize and the Virgin Islands
that obscured their involvement and circumvented U.S. usury laws,
according to four former employees of their company, Cane Bay Partners
VI LLLP. The sites Cane Bay runs make millions of dollars a month in
small loans to desperate people, charging more than 600 percent interest
a year, said the ex-employees, who asked not to be identified for fear
of retaliation.
Slusky’s fund, Vector Capital IV LP,
bought into Cane Bay a year and a half ago, according to three people
who used to work at Vector and the former Cane Bay employees. One
ex-Vector employee said the private-equity firm didn’t tell investors
the company is in the payday-lending business, where borrowers repay
loans out of their next paychecks.
