A partner at US law firm Weil Gotshal personally invested €5mn in the private equity fund that bought Israel’s NSO Group, the maker of military-grade spyware used to hack human rights activists, according to two people with knowledge of the matter and a New York court filing.
Gerhard Schmidt, co-managing partner of the law firm’s German offices, made the investment in 2017 using an arrangement that meant he did not have to pay the same fees demanded of other investors, the document says.
Schmidt, who Weil describes on its website as “one of the leading private equity and M&A lawyers in Germany”, was also, in his professional capacity, an adviser on the fund’s February 2019 acquisition of NSO. He also sat on the board of a holding company that oversaw the spyware firm, and chaired Novalpina Capital, the buyout group whose €1bn fund bought NSO.
Schmidt’s investment in the poorly-performing fund, and his work for NSO and its owner, underscores the extent of the white-shoe New York law firm’s involvement with a company that the US government would later say had enabled authoritarian governments to target dissidents, journalists and activists.
Weil and Schmidt did not respond to requests for comment. NSO said it “complies fully with all applicable laws and regulations, and sells its technologies exclusively to vetted intelligence and law enforcement agencies”.
The New York court filing, a declaration by an outside expert who was brought in to oversee the private equity fund after it fell into crisis in 2021, is part of a legal case that threatens to draw Weil into a wide-ranging dispute taking place in Luxembourg about the fund and its investments.
The purpose of the US lawsuit is to ask the law firm to provide information for the Luxembourg suit, which it is not a party to, though the fund is separately suing Weil in Germany over attorney fees.
NSO’s Pegasus tool can read encrypted messages, turn on a phone’s camera and microphone remotely, and track its location.
When NSO’s oversight board took steps to renew Saudi Arabia’s access to the tool after the murder of journalist Jamal Khashoggi, Schmidt was among those who “would have been voting”, the court filing said.
NSO had halted a contract with Saudi Arabia after allegations that its technology had been used to track Khashoggi, who was murdered in 2018. The kingdom’s access to the software was restored by mid-2019, according to two people familiar with the decision.
Novalpina Capital, the private equity group that bought a stake in the Israeli spyware firm, imploded in 2021 after a fallout between its founders, Stephen Peel, Stefan Kowski and Bastian Lueken, former dealmakers at the US buyout group TPG.
Schmidt was the “key legal adviser” to the €1bn Novalpina fund for its major acquisitions, including NSO, French pharmaceutical group Laboratoire XO and Romanian betting company Maxbet, the filings say.
Schmidt was able to invest in the Novalpina fund, raised in 2017, without fees because he had an “existing relationship” with the trio that founded Novalpina, according to the outside expert, Gavin Farrell, in the declaration.
It is not uncommon for senior lawyers at large firms to personally invest in the private equity funds they advise, sometimes on more generous terms than other investors.
Disclosures from the Oregon Public Employees Retirement Fund, which also invested in the fund that bought NSO, offer a glimpse into its performance.
In a report for the second quarter of 2025, the Oregon investor marked the value of its stake in the fund at 57 cents on the dollar and said the fund’s internal rate of return, a private equity performance metric, is minus 15.3 per cent.
Weil said this month that Schmidt would leave the firm at the end of this year after more than two decades as co-managing partner of its German offices.
Peel, Kowski and Lueken were stripped of control of the Novalpina fund in a highly unusual move in 2021, after investors such as public pension funds concluded they had fallen out so badly they could no longer manage the fund together.
Those investors tasked US consultancy Berkeley Research Group with winding down the fund and returning cash to investors. That responsibility now lies with Treo, an asset manager founded by former BRG directors. Farrell is Treo’s chief operating officer.
Treo said it was “wholly committed to protecting the interests of the fund and maximising value for investors, and will continue to take all necessary action to do so”.
Shortly after the Novalpina fallout, in November 2021, the US Commerce Department put NSO on a trade blacklist, saying its spyware enabled “transnational repression, which is the practice of authoritarian governments targeting dissidents, journalists and activists outside of their sovereign borders to silence dissent”.
NSO was taken over by creditors in 2023, and was later returned to one of its founders.
Additional reporting by Olaf Storbeck
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