Filed by the Steamfitters Local 449 Pension Fund pension fund in Delaware Chancery Court, the suit alleges that KKR co-founders Henry Kravis and George Roberts engineered a $500 million TRA-related payout for themselves at the expense of KKR shareholders.

As part of KKR’s 2021 reorganization from its Up-C structure into a corporation, Kravis, Roberts, and other KKR unitholders executed a tax-free conversion of their partnership units into shares.

Had that conversion not happened, unitholders could have completed a taxable exchange at some point in the future that would have created contingent tax assets for KKR. In this scenario, the TRA entitled the exchanging unitholders to a portion of the tax offset benefit, usually around 85 percent, with the remainder going to the corporation.

However, this potential tax offset and subsequent TRA benefit would only have occurred if unitholders had decided to liquidate their holdings by exchanging units for shares in a taxable transaction and then selling the shares.

The $500 million “TRA Termination Payment” was provided as compensation to unitholders in exchange for giving up that potential future payment, even though there was neither an immediate benefit to KKR nor any guarantee a taxable exchange would have ever happened at all.

"This case is about two Wall Street titans who wanted to enrich themselves and their fellow private unitholders because their peers had done so," the complaint states. The lawsuit names Kravis and Roberts as defendants alongside current KKR co-CEOs Scott Nuttall and Joseph Bae, other board members, and the company itself.

The KKR suit is part of a growing wave of lawsuits targeting TRA payouts. Already this year, healthcare company Premier agreed to a $71 million settlement in a TRA-related case brought by the same plaintiffs' lawyers, and the Delaware Chancery Court allowed cases to proceed against Carlyle Group over a $344 million founder payout and against GoDaddy for an $850 million TRA buyout that plaintiffs claim vastly exceeded the agreement's book value.

The complaint alleges that, in planning for the reorganization, KKR referenced Carlyle and a similar Apollo agreement as market comps, yet proceeded with the payment even after KKR’s outside advisers cautioned that shareholders at both peers had issued Section 220 demands (the right to inspect corporate records) in response to the payments.

The plaintiffs contend that KKR's advisers subsequently rebranded this payment as compensation for the potential future relinquishment of special controlling shares. This strategy allegedly involved striking through references to "TRA termination payments" in board materials while, all while the payment itself remained unchanged. The suit goes on to specifically mention Evercore’s advisory role, accusing the firm of “aiding and abetting breach of fiduciary duty.”

KKR has called the lawsuit "legally deficient,” with a firm spokeswoman saying it "mischaracterizes the transaction" and that the deal offered substantial benefits to shareholders. The firm plans to file a motion to dismiss.