Highland Capital Founder Whips Out His Thesaurus To Insult Investors

Jimmy Dondero's got a host of pet names for his clients.
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By Jonund (Own work) [CC0], via Wikimedia Commons

via Wikimedia Commons

Hedge fund manager James Dondero is currently fighting legal battles on two fronts: one is versus an ex-portfolio manager who say he was fired for raising questions about Dondero’s alleged plan to “use money due to outside investors…to buy a South American company that he intended to convert into a condom manufacturer” and also about Dondero’s use, allegedly, of the term “jackasses” to describe said investors. The other is versus a bunch of investors themselves, who, in addition to claiming Dondero owes them money, say he enjoys referring to them as "idiots."

Highland’s founders James Dondero and Mark Okada have fought an unusual number of legal battles since the crisis. But the two new lawsuits mark the first time organized committees representing all investors in the liquidating hedge funds have sued the firm; one of the committees recently scored a victory in its case. The lawsuits claim Highland, which manages about $17 billion, enriched itself by secretly taking a roughly $30 million fee out of one fund, called Crusader, and inappropriately selling assets from a second, called Credit Strategies...One of the largest investments left in the fund in 2011 was a 19% private-equity stake in Cornerstone Healthcare Group, an acute-health-care company majority owned by Highland and its other hedge funds. The shares became a flashpoint in 2012 after Highland proposed selling the stake to Cornerstone for less than what investors considered fair value. Investors led by the Colburn Foundation, a Los Angeles-based classical-music charity, and investment adviser Concord Management refused and tempers flared. Mr. Dondero called the investors “idiots,” and “disrespectful,” for questioning the proposed share sale, according to emails disclosed in court documents. He also pushed the investors to start paying Highland a $250,000 monthly management fee for liquidating the defunct fund because of the “significant monthly legal expenses” involved, according to the emails.

Terms Dondero will surely be accused of using about his investors in any potential future lawsuits? Smart money's gotta go with:

  • Bozos
  • Clowns
  • Morons
  • Sh*ts-for-brains
  • Mouth-breathers

Highland Capital Investors Allege Wrongdoing in Long-Closed Hedge Funds [WSJ]

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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]