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Last week, we discussed an arbitration panel’s blistering ruling that Bridgewater Associates, as part of a bad-faith attempt to destroy a couple of former employees’ new hedge fund, backed up its allegations of theft of trade secrets and violations of all sorts of agreements with evidence made up, or not submitted. At the time, we hadn’t actually seen the arbitrators’ report, since it wouldn’t be publicly filed for another two days, but we knew enough—specifically, the above and that Bridgewater had been ordered to pay its ex-charges’ legal fees—to know it was bad. Worse than losing a fifth of your clients’ money and allegedly trying to stiff your former co-CEO because she’s a woman combined.

Let’s take the decision to file the complaint in the first place. What, exactly, made Bridgewater think Lawrence Minicone and Zachary Squire had absconded with the secret sauce, held onto it for three years and then put it to their own uses? Why, a leaked marketing deck that looked nothing like its own.

Claimant was emphatic that its only basis for alleging misappropriation of its trade secrets was its review of TCM's marketing materials ("deck"). Jensen stated, "I don't have any other evidence. I don't need any other evidence…." Jensen admitted allegations of misappropriation and disclosure of confidential information were based on a guess, "...without seeing the literal code, obviously just an educated guess that it was a process that he had exposure to here…." Bridgewater refused to produce a copy of its marketing materials - its deck - but Jensen testified that TCM's deck was "generally not the same" as Bridgewater's.

Hmm. That’s not very convincing. Surely, Bridgewater had something more. After all, employees’ persons and devices are rather tightly monitored, as we all know and as Minicone and Squire helpfully pointed out.

As is widely-recognized, Bridgewater's offices are extremely secure facilities, requiring employees such as Squire and Minicone to place their cell-phones into signal-proof lockers upon entry, recording all employee movements by video, recording phone calls and internet communication, logging all computer access, requiring any files or attachments sent externally via email to be explicitly approved on a case-by-case basis, and maintaining restricted zones within Bridgewater's offices. In short, if Squire or Minicone had actually 'misappropriated' any trade secrets, Bridgewater would have evidence of it.

And, indeed, Bridgewater did have such evidence. Unfortunately for Ray Dalio & co., it wasn’t particularly helpful evidence.

Brennan, the person responsible for the security of Claimant's intellectual property in connection with departing employees, testified that he knew at least as early in February, 2017 that Squire did not have access to the five alleged trade secrets…. Bridgewater's own internal records showed Squire had zero exposure to trade secrets, and showed Minicone's exposure as 2%.

That brings us to the meat of this bad-faith sandwich, in which Bridgewater chooses binding arbitration, laboriously negotiates a protective order to keep its precious secrets a secret during said arbitration, declines to provide any evidence—including its marketing deck—as part of the proceedings it chose, except for one piece of evidence it made up that directly contradicts the above facts it must have known it would be questioned about under cross-examination.

The only evidence Claimant presented in support of Respondents' access to trade secrets were lists created for purposes of the litigation by a Bridgewater employee who was hired two years after Respondents left the company, and he did not testify. Respondents' counsel challenged the accuracy of the lists, pointing out that they included persons listed as having access during the period of Respondents' employment who were not employed at Bridgewater during that period and excluded persons who did have access.

Why? Why would Bridgewater bring these claims it clearly had no intention of actually backing up beyond arrogance (“I don’t need any other evidence”) and intimidation, and why did it continue with them after it became clear that Minicone and Squire were not going to be intimidated and would instead make it put up or humiliate itself before its own arbitration panel? Well, in a few words, hurt feelings and bad faith.

Both Jensen's and Rotenberg's testimony conveyed a sense that Bridgewater expects employees at Respondents' level to remain with Bridgewater for their entire careers and regards leaving as a betrayal. Rotenberg's demeanor indicated an undercurrent of anger that one or both Respondents had left Bridgewater; his answers to straightforward questions on cross-examination were lengthy and evasive regarding specifics….

We further conclude that the claims of misappropriation were brought and/or maintained in bad faith for the purposes of causing Respondents' needless expenditures of money and time in order to defend themselves against the claims…. Claimant's actions in continuing to press its claims constitute further evidence that its intentions were not to prove misappropriation, but rather, were to adversely affect Respondents' ability to conduct a competitive business.

Now that is some slimy weasel shit. And rather a catalogue of laziness and inattention to detail that certainly throws some doubt onto Bridgewater’s vaunted Principles and processes. About that,

The testimony of Claimant's fact witnesses attempting to establish a unique "Bridgewater logic" or "Bridgewater approach" described a well-known and widely used process in economics and other disciplines…. Bateson described Leibowitz's description of Bridgewater's "investment pipeline" as "very generic. All systematic funds will do this process." Bateson also noted that Bridgewater's SBGE (as described) is more highly correlated to a third-party estimate whose methodology is publicly available - Goldman Sachs' - than to TCM's growth measure. Bridgewater's own employee acknowledged that Goldman Sachs' statistics-based growth estimating methodology is very different from Bridgewater's SBGE. Lewis testified regarding Claimant's Short-Rate technology, that he was unable to identify anything "unique or even unusual…"

Mmm, worth every basis point of that two-and-20, I’m sure you and all of Bridgewater’s clients will agree.

Bridgewater Associates, LP v. Lawrence Minicone and Zachary Squire [New York State Unified Court System]
Earlier: Arbitrators Rule Bridgewater Had Something To Fear From The Truth, And So Made Stuff Up


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