Legal experts say much of the alleged collusion outlined in the antitrust lawsuit may have been nothing more than firms working together in perfectly acceptable ways to spread the risk of taking on a big investment. The practice, they say, allowed the investment firms to pursue the largest deals and offer premiums to shareholders.

A lack of action by the U.S. Department of Justice in a parallel antitrust investigation could also suggest there are few grounds to go after the industry. That probe dates to 2006, according to the lawsuit and regulatory filings from some private equity firms.

"If these allegations are true, and if the DOJ has been investigating since 2006, one wonders then why didn't the DOJ do anything?" said Maurice Stucke, a former Justice Department antitrust prosecutor who is now a professor at the University of Tennessee College of Law.

The Justice Department declined to comment.

The Boston federal judge overseeing the case released a mostly unredacted version of the complaint this week. The defendants had objected, arguing that competitive information about deals should remain blacked out from public view.

One exchange appears particularly revealing. According to the lawsuit, Blackstone Group LP President Tony James wrote in an email to KKR & Co co-founder George Roberts: "We would much rather work with you guys than against you. Together we can be unstoppable but in opposition we can cost each other a lot of money."

Roberts, the lawsuit said, replied later that day: "Agreed."

The emails were allegedly sent after KKR decided to step down in the $17.6 billion bidding for semiconductor company Freescale in 2006. A group led by Blackstone eventually won.

Blackstone, KKR and Roberts declined to comment. James did not return a call for comment.

Many lawsuits contain snippets of emails or other conversations involving defendants, and legal experts note that such excerpts may not tell the whole story.

In one instance, the plaintiffs accuse KKR of having "bragged" to its investors in 2005 that "Gone are the days when buy-out firms fought each other with the ferocity of cornered cats to win a deal."

But those words were not KKR's. The firm cited this sentence, which originally appeared in a March 31, 2005, article in The Economist magazine, in a presentation to investors discussing the trend of so-called club deals in which buyout firms pursue acquisitions together, according to KKR spokeswoman Kristi Huller. She said the quote was a bullet point in the presentation and was clearly cited as being from the magazine.

Chris Burke, a lawyer for the plaintiffs, said it was not misleading to include the KKR presentation in the lawsuit without more explanation.

"Was it lifted out of context? No," said Burke, of law firm Scott + Scott. "Was it out of an Economist article? Sure."

PRICE-RIGGING ALLEGATIONS

In the lawsuit, the plaintiffs contend that KKR, Blackstone, Bain Capital Partners LLC, the Carlyle Group and others conspired to suppress prices of takeover targets, hurting shareholders in many companies purchased in the deal boom between 2003 and 2007.

Mitt Romney, the Republican presidential candidate and a Bain founder, left that firm in 1999, before the transactions in question. He is not named in the complaint.

In one email cited prominently in the opening pages of the complaint, Silver Lake Partners co-founder Glenn Hutchins seemingly anticipated that his fund would participate in rivals' future deals after bringing a half dozen others into the 2005 buyout of SunGard Data Systems.

"We invited you into Sun(G)ard and have a reasonable expectation of your reciprocating," Hutchins wrote to Blackstone's James, according to the complaint.

Silver Lake and Hutchins declined to comment.

Legal experts say email exchanges among top executives at rival firms do not necessarily mean collusion. While firms competed on smaller deals, they were increasingly working together to spread the risk of larger buyouts and needed to talk to one another, experts said.

The evidence in the emails "is pretty thin gruel," said Hays Gorey, a partner with the GeyerGorey law firm and a former Justice Department antitrust prosecutor.

"Without proof that each conspirator 'got something,' it's simply not believable that they were joint actors," said Gorey, who is not involved in the lawsuit.

The case, filed in 2007, seeks class-action status. Suits by several pension funds and individual shareholders were combined, and after being allowed to move forward, the plaintiffs updated the complaint with the fruits of their investigations into 11 private equity firms.

Burke, the plaintiffs' attorney, said substantial evidence of collusion has been uncovered and noted that the judge allowed him to expand his investigation to 27 deals, up from nine initially.

In every deal, he said, no rival ever offered a counter bid once a target company's board accepted a written offer from a buyout firm.

"It's a complete absence of competition. That's thin gruel?"

A trial could be at least a year away. Assuming the case survives summary judgment, a move by defendants to get a case thrown out before trial, Burke said the next hurdle likely would be a fight to formally recognize the case as a class action.

The buyout firms potentially could be on the hook to compensate the selling shareholders for what they should have received in a competitive auction.

In some antitrust cases, plaintiffs can receive three times the damages they suffered. The plaintiffs claim that the 2006 buyout of hospital chain HCA alone was depressed by $1 billion due to the alleged collusion.

It may be harder to make similar claims on other deals, such as the $45 billion takeover of power company TXU. In that deal, a consortium of KKR, TPG Capital, Goldman Sachs Group Inc's private equity arm and others teamed up, agreeing to pay a premium of more than 20 percent for the company.

"Many of these deals could not have been done by one firm individually, you need to pool the firms together," said University of Chicago Professor of Finance Steven Kaplan.

KKR has taken significant writedowns on the TXU acquisition, the largest buyout in history. Even if the plaintiffs prove collusion on the deal, they may not be able to prove damages, said Robert Miller, a law professor at the University of Iowa.

(Reporting By Tom Hals in Wilmington, Delaware, and Mike Erman in New York; Additional reporting by Nate Raymond in New York; Editing by Martha Graybow and Eric Beech)

• A Permanent Economic Emergency