• News

    Highland Capital Management Founder Sees Your Hiding Of Assets And Raises You A Megalomaniacal Prick

    As some of you may recall, back in March, Highland Capital Management founder and CEO James Dondero testified that he is “insolvent under Texas family law, if not according to normal accounting rules,” despite a 2010 tax return showing his adjusted gross income that year to be in excess of $36 million. The reason his finances were in question was because Dondero filed for divorce in September, and how much he owes his wife Becky is currently in dispute. Becky is “seeking enforcement of a prenuptial agreement guaranteeing her half of the couple’s community property, capped at $5 million,” plus “spousal support and interim attorney fees.” James, perhaps you can glean, is hoping it will be less than that and perhaps even nothing. One thing that really didn’t help?

    Patrick Daugherty, a former senior portfolio manager at Highland who quit in October, testified that he met with James Dondero for drinks last month. “He told me his plan was to get his net worth down and pay her as little as possible,” said Daugherty, who was called to the stand by Becky Dondero.

    That testimony was given on March 28th. On April 11, this happened:

    Highland Capital Management, the $20 billion hedge fund and private equity firm based in Dallas, has launched a lawsuit that calls its former private equity investing chief a “megalomaniacal” manager who engaged in “abusive tirades” that “dehumanized employees.” Patrick Daugherty is the former head of stressed special situations and private equity at Highland Capital Management, where he was responsible for $8 billion of assets until he resigned in September 2011. Known as a blunt-speaking Texan, Daugherty has served on the board of Metro-Goldwyn-Mayer and as chairman of companies like Cornerstone Health Group.

    According to a 14-page complaint Highland filed in Texas state court in Dallas earlier in April, Daugherty has been paid in excess of $26 million while at the firm, but voluntarily resigned after “Highland refused to accede to his unacceptable ultimatums and megalomaniacal demands regarding compensation.” The lawsuit claims that Daugherty was “belligerent to peers” and that Highland employees complained and even quit after Daugherty publicly berated them as “‘f—ing idiots’” and disparaged them using other vulgarities. Highland, which has a reputation in the investment community for using hard-hitting tactics, pulls no punches in a lawsuit that at times can appear cruel. It claims that Daugherty’s tenure at Highland was characterized by extreme behavior and his performance diminished over the years as he “became increasingly unmanageable, erratic, and insubordinate.”

    It didn’t have to be this way, Patrick!

    $20 Billion Highland Capital Calls Former Private Equity Chief “Megalomaniacal” [Forbes]

    / Apr 27, 2012 at 4:09 PM
  • News

    Things AIG Employees Say: “Make sure you grab a bite to eat before this one does! He’s been known to clean out a Danish platter!”

    What were AIG employees doing in April 2008? Carelessly writing CDS on enormous quantities of mortgage-backed securities and (allegedly) laying the groundwork for being sued over “racist [and sizeist?] taunts,” apparently.

    An obese black lawyer filed a federal lawsuit yesterday against insurance giant AIG and an ex-supervisor, saying his white boss yelled out “Hey! Hey! Hey! It’s Fat Albert!” and other racist taunts. Earl Brown, 43, an Ivy league-educated lawyer, claimed in the civil-rights suit that the ex-boss, John Hornbostel, 49, peppered him with racist remarks and cruel jokes about his weight for years before he was canned without cause. “Make sure you grab a bite to eat before this one does! He’s been known to clean out a Danish platter,” Hornbostel yelled about Brown during a meeting in April 2008, the suit claims. Hornbostel then allegedly walked away humming the tune to the “Fat Albert and the Cosby Kids” animated TV show.

    Hornbostel seems to have ended up at a hedge fund post-AIG. It’s unclear if he’s tried out any new material on his new colleagues.

    Obese lawyer sues supervisor and AIG for ‘Fat Albert’ insults [NYP via ATL]

    / Apr 26, 2012 at 3:47 PM
  • News

    American Apparel CEO: Numerous Lawsuits Against Me Are A Testament To My Awesomeness

    Has the profitability of your company come into question of late? Have you been sued many, many times, typically for sexual harassment? Want to set the record straight but are unsure of what to say? Perhaps Dov Charney can help. In an interview with CNBC today, Charney told Jane Wells that any suggestion that American Apparel can’t turn a profit on its mesh unitards, gold lamé leggings, and fishnet bodysuits is totally off based. “I think you’re casting [the business] in the wrong light to say it’s unprofitable,” Charney said. “From accounting perspective, from 20 feet up, yeah, it’s unprofitable. But if you get down to the numbers…we’re getting our groove back.” There was also this exchange.

    Wells: I’ve counted, what is it, nine lawsuits against you? That’s  a lot.

    Charney: Yeah. It’s also a testimony to my success.

    Wells: Do you think you’re inappropriate at all?

    Charney: No.

    Wells: The range of criticism is everything from sexual predator to just…weird.

    Charney: Well, you know, I mean, weird? I like weird…Many of the great entrepreneurs of the last century have been criticized for being somewhat different.

    Wells: Do you see yourself as a Steve Jobs meets Hugh Hefner type?

    Charney: That wouldn’t be for me to say.

    American Apparel CEO: Tattered But Not Torn [CNBC]

    / Apr 10, 2012 at 6:38 PM
  • sergio ermotti


    Court Finds That UBS Exploited Clients And Tricked Them Into Overpaying For Toxic Securities, But In A Legal Way

    This is kind of exciting: a bank won a CDO case! Or: something nice happened for UBS! So the story goes like this (from the court opinion): in March 2002, UBS did a synthetic CDO deal called North Street 2002-4 with Landesbank Schleswig-Holstein, a German landesbank, where LSH (now called HSH, due to mergers probably […]

    / Mar 28, 2012 at 12:35 PM
  • News

    Jimmy Cayne May Be About To Come Into Some Money!

    10-pound bag of Chronic Supernova, consider yourself bought.

    Thousands of former Bear Stearns Cos. (BSC) employees will share a $10 million settlement of lawsuits claiming they lost money on the bank’s stock in their retirement accounts. Two ex-Bear Stearns employees yesterday asked a federal court judge in Manhattan to approve the settlement on behalf of an estimated 8,400 former colleagues. The settlement will resolve class-action suits filed beginning in 2008 against Bear Stearns and other defendants by former employees of the bank. The employees, participants and beneficiaries of Bear Stearns’s employee stock ownership plan who held shares of the bank’s common stock, claimed risky investments in subprime mortgages caused them to lose money.

    Ex-Bear Stearns Employees to Get $10 Million in Settlement [Bloomberg]
    Related: Jimmy Cayne Takes “It’s A Bag Of Oregano” Route In Face Of Drug Use Allegations

    / Mar 21, 2012 at 4:05 PM
  • jed-rakoff-21


    Appellate Court Willing to Entertain the Possibility that Citi Was Not Committing Fraud

    I’ve had some fun these last few days proposing counterintuitive theories for why Citi might not suck as much as you probably think it does and it’s nice to see others joining in the pastime, even if this sounds a little far-fetched:

    The district court’s logic appears to overlook the possibilities (i) that Citigroup might well not consent to settle on a basis that requires it to admit liability, (ii) that the S.E.C. might fail to win a judgment at trial, and (iii) that Citigroup perhaps did not mislead investors.

    That piece of rank conjecture is from the Second Circuit’s opinion on an appeal* of Judge Rakoff’s rejection of the settlement between the SEC and Citi over some mortgage-backed securities. Here’s DealBook:

    / Mar 15, 2012 at 7:27 PM
  • M&A, News

    Delaware Judge Driven To Possibly Obscene Energy Industry Euphemism By Kinder-El Paso Merger

    Delaware Chancellor Leo Strine has a bright future in blogging if chancelling doesn’t work out for him. Here’s how he describes Kinder Morgan’s negotiations to buy El Paso, specifically KMI CEO Rich Kinder’s price retrade with EP CEO Doug Foshee:

    Kinder said “oops, we made a mistake. We relied on a bullish set of analyst projections in order to make our bid. Our bad. Although we were tough enough to threaten going hostile, we just can’t stand by our bid.”

    Instead of telling Kinder where to put his drilling equipment, Foshee backed down.

    I umm … I’m pretty sure that that quote from Kinder is approximate.

    Anyway, this is from Strine’s opinion refusing to block the KMI-EP merger from proceeding even though he is pretty pissed about some of the apparent conflicts of interest in the deal, including that Goldman Sachs owns almost 20% of KMI while also advising EP, that the lead GS banker owned some KMI stock that he didn’t disclose, and that Foshee negotiated the merger single-handed while also maybe thinking about possibly LBOing EP’s E&P business for his own self.

    Lucrative though my current pseudoprofession is, I suspect that if Strine ever leaves the chancelling racket he’d probably prefer to try his hand at merging and/or acquiring. Certainly he is fond of dispensing tactical advice:

    / Mar 1, 2012 at 6:47 PM
  • georgesorosgirlfriend


    Does George Soros Really Want The Ex-Girlfriend Who He Promised An Apartment To Go Away?

    Remember Adriana Ferreyr? To recap, she’s a woman with whom George Soros either conducted “a serious meaningful relationship” that lasted five years or had an “on-again, off-again and non-exclusive intimate relationship,” depending on who you ask. Last August, Ferreyr sued the billionaire for $50 million based on the promise he allegedly made to buy her […]

    / Feb 28, 2012 at 3:24 PM
  • john paulson

    Hedge Funds

    Former Paulson And Co Investor Isn’t Buying The “Oops, I Invested In A Horrible Stock” Act

    Remember the Paulson & Co Sino-Forest investment? Turned out to be one of the fund’s less than stellar ideas? Will get you an hour in the office hole for mentioning it? Most people  affected by the trade have so far been willing to let it slide, perhaps preferring to focus their energies on bigger beefs […]

    / Feb 21, 2012 at 12:56 PM
  • saccapitalfleece


    Ex-Mrs. SAC Capital Isn’t Finished Here

    The U.S. Court of Appeals for the Second Circuit will hear oral arguments at 10 a.m. Tuesday in a lawsuit filed by the ex-wife of SAC Capital Advisors founder Steven A. Cohen. Patricia Cohen alleges he hid assets during their divorce proceedings. A lower court dismissed the case in March 2011. [WSJ]

    / Feb 21, 2012 at 11:57 AM
  • Banks, News

    The Mortgage Settlement Is Fine

    When people who hate banks and love homeowners are full of wild rage about this here mortgage settlement, and when people who love banks and hate homeowners are full of equal and opposite rage, that is pretty good evidence that the mortgage settlement is sort of meh and compromise-y and not that interesting, so let’s […]

    / Feb 9, 2012 at 5:13 PM
  • News

    Maybe The SEC Decided To Throw A Trial So It Can Go Back To Settling Everything

    I try to be honest when telling you that a court complaint or SEC filing or research paper is a fun read, just in case you might go read it, though of course there’s no accounting for tastes and I may enjoy many things that you don’t.* And that’s okay. In any case I doubt […]

    / Dec 16, 2011 at 5:42 PM
  • News

    Don’t Even Entertain The Thought Of Serving Jon Corzine With A Lawsuit While He’s On His Break

    As you may have heard, today is Jon Corzine’s third day testifying in Washington about the whole MF Global thing. All morning and this afternoon have been devoted to questioning by the House Financial Services Committee, with a couple of the standard 15 minute recesses sprinkled in. In fact, there was one not too long […]

    / Dec 15, 2011 at 3:28 PM
  • News

    And Now, Blech, Mortgage Lawsuits

    It’s difficult to keep track of all the things that all the people are suing all the banks for regarding mortgages. A place to start is by remembering that banks stood in the middle of originating loans to people who didn’t pay them and selling them to people who are now sad that they didn’t […]

    / Dec 2, 2011 at 2:55 PM
  • News

    Surely The SEC Is Sick Of Going To Court By Now?

    A lot of legal issues look like substantive things but are actually things about what institutions can and want to do. Obviously more people want to think about questions like “should the U.S. have universal health insurance?” than about questions like “does the Anti-Injunction Act bar lower federal courts from reviewing the individual mandate until […]

    / Nov 28, 2011 at 3:11 PM
  • News

    Hank Greenberg Wants To Know Why His Bailout Was So Much Crappier Than Everyone Else’s

    The complaint in Hank Greenberg’s lawsuit against America is now online, and strange and entertaining in equal measures. I’m pretty sure Occupy Wall Street will be interested to hear his theory that the Constitution allows Fed bailouts of struggling financial institutions, but requires those bailouts to be much gentler than the one handed to AIG. […]

    / Nov 21, 2011 at 4:26 PM
  • News

    Hank Greenberg Estimates If The Government Had Minded Its Own Damn Business Back In ’08, AIG Would’ve Been At Least $25 Billion Ahead Right Now

    Remember September 2008? Remember how American International Group was doing in September 2008? Kind of not so hot? Maybe needed the government to front it some cash to the tune of $85 billion? Maybe needed even more money after that, even though they swore they just needed that one hit, just to get them by? […]

    / Nov 21, 2011 at 11:47 AM
  • News

    MF Global Employees Not Going Down Without A Fight

    They see your firing and raise you a $25 million lawsuit.

    / Nov 14, 2011 at 4:30 PM
  • News

    Hedge Fund Founder Sued For Telling Employees How He Really Feels

    One of the most difficult and important part of being a hedge fund manger is the constant need to come up with new, outside the box ideas. This is, of course, crucial specifically with regard to investment ideas but also just generally, there is the never-ending pressure to maintain freshness in all matters of business. […]

    / Nov 7, 2011 at 10:23 AM
  • News

    If He Could Turn Back Time…If He Could Find A Way

    In 2003, things were going pretty well for Todd J. Remis. Great, even. The equity research analyst had left Warburg Pincus Asset Management to found Hygrove Partners LLC, he was living the good life in New York City and he’d recently married Latvia native Milena Grzibovska. The wedding was an intimate affair that included less […]

    / Nov 3, 2011 at 2:09 PM
  • News

    Federal Judge Wants To Know Why SEC Is Only Charging Citi 1/5th As Much As It Charged Goldman For Ripping Off CDO Investors

    If the SEC really wanted to reduce the chances of embarrassing itself, besides better Internet monitoring software it really ought to look into filing securities lawsuits outside of New York. Every bank is incorporated in Delaware and does all of its activities everywhere – surely they could find a CDO investor in California. But the […]

    / Oct 27, 2011 at 6:28 PM
  • M&A, News

    Delaware Judge To Goldman: Here, Let Me Re-Do That Fairness Opinion For You

    A thing I liked about being a banker, but that made me consistently terrible at managing my PA, was that in banking you don’t really get paid to be right about things. Nobody made any money telling AOL and Time Warner that maybe they’d be better off on their own. Instead, your job is telling […]

    / Oct 17, 2011 at 6:10 PM
  • Banks

    Goldman Won’t Let A Few Pesky Shareholders Stand In The Way Of Its Bonuses*

    In things that are not a surprise, a Delaware court this week threw out a lawsuit against Goldman Sachs directors and officers for paying bankers and traders The Wrong Way. Specifically: The Plaintiffs contend that Goldman’s compensation structure created a divergence of interest between Goldman’s management and its stockholders. The Plaintiffs allege that because Goldman’s […]

    / Oct 14, 2011 at 12:38 PM
  • Love

    Investment Manager Counter-Sued By Playboy Modeling Ex-Girlfriend Over Blank Checks, Tuition Fees

    Remember Andrew Oberwager and Karolina Stefansi? For those who need a refresher: they’re two highly educated kids who were once in love and are now suing each other in court. When they met, Oberwager was a PM at Columbus Circle Partners, who had earned the right to not only put the letters C, F, and […]

    / Oct 3, 2011 at 10:57 AM
  • ponzi schemes

    Full Tilt Poker Doug Lied To You

    In fairness, no one straight up asked him “is Full Tilt a global Ponzi scheme,” as opposed to “a legitimate poker company.”

    / Sep 20, 2011 at 3:14 PM
  • News

    How Much Money Will Fannie And Freddie Get From Banks For Crappy Mortgages, Use To Make Further Crappy Mortgages?

    The Federal Housing Finance Agency’s lawsuits against every bank paint a pretty dastardly picture of the seventeen big banks – three of which are now BofA – committing all sorts of frauds in securitizing mortgages and selling them to Fannie Mae and Freddie Mac. This in turn caused Fannie and Freddie to have a series […]

    / Sep 6, 2011 at 4:28 PM
  • News

    Attention Single Men Looking For Love And/Or To Get Their Hedge Fund Off The Ground: Westchester Divorcée’s Got What You Need

    From Forbes: “In a 15-page complaint filed in Manhattan’s New York state court earlier this week, Simon accuses his wife, Linda Simon, of hacking into a password-protected Twin Capital computer located in the Simon’s home in Purchase, N.Y. and duplicating the hard-drive. The lawsuit claims that the hacking took place shortly after Simon had vacated […]

    / Aug 31, 2011 at 1:52 PM
  • News

    Eliot Spitzer Learns The Disadvantages Of Not Being The Government

    Although you know that Eliot Spitzer was slightly preoccupied during his time as New York’s Attorney General, maybe you can understand why William Gilman and Edward McNenney might have thought that he was devoted full-time to bullying them. Gilman and McNenney, formerly executives at insurance broker Marsh & McLennan, have not exactly had positive interactions with […]

    / Aug 22, 2011 at 6:14 PM

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