OK, I'll use Bain as an example. Bain has a history of some successes and some failures. I use the word "failure" advisedly since there doesn't seem to be any failure amongs the principles at Bain. No matter if the target company succeeds or fails, these guys get paid and paid handsomely. I wonder why that is.
In my long ago days in business school, there was a thing called risk. It supposedly was unavoidable if you invested. Yet Bain doesn't seem to incur any risk in any of their ventures. After a little digging, I find out that often an initial loan is taken out with Bain as the borrower. This money is then used to buy into the target company. Thus Bain immediately becomes a priciple in that company. They then can transfer their debt that they used to buy in to the target company. Whoa!! Does that sound like it should be illegal? It surely does to me.
It seems they have now transferred any personal risk that Bain had to the target company. Now, as principles, they can make policy and they do so often by paying themselves consultant fees. If and when they sell the company that debt goes with the sale. Nice deal, eh? It's not illegal. However, it used to be illegal. That law was somehow removed from the books sometime during (you guessed it) the Reagan Administration. Like Glass Steagall, it sounds like a good law was wiped out by GOP Inc.