[lotsofpulp]

Why wouldn't it be? Did the PE firm force someone to issue debt for a worthless business? I would hold the lender responsible for due diligence.

[amelius]

The question was more: why does the law allow this? They are using one company to benefit another, then leaving it in debt without financial liability. Seems like a gaping loophole in the law there.

[ben509]

Except they had financial liability: all the collateral they lost.