The old cliché goes that the cover-up is always worse than the crime. The problem with that as a rule is that often the crimes themselves are quite bad (see: Roman Catholic Church), and the people (allegedly) committing them often think highly enough of their intelligence or influence or both to assume that they’ll be the one that gets away with it.
Take Dan Kamensky. The Marble Ridge Capital founder spent two years as a member of Neiman Marcus’ unsecured creditors committee, browbeating the troubled retailer into at last giving its lenders a share of its one valuable asset, e-commerce business MyTheresa, which it had—possibly improperly—sought to protect from the same. And Kamensky wanted those shares. Not only those to which Marble Ridge was entitled, but those going to other creditors who didn’t want them. And he’d be happy, he told them, to take them off their hands for a very generous 20 cents on the dollar.
Then, he got a phone call from his fellow committee members: “Great news! Jefferies has a client who wants to buy the MyTheresa shares for more than 20 cents!”
This was not great news to Kamensky. By his own admission, he freaked out. He’d spent $3.5 million of investors’ money to secure them for his hedge fund and didn’t probably wasn’t particularly interested in explaining how he’d spent that money and come up empty-handed. So he told his fellow committee members that Jefferies “was likely just fishing for information.” He, of course, didn’t really believe that himself, as evidenced by the fact that he felt it necessary to send an instant message to an executive at the bank, which just happened to count Marble Ridge as a major client: “Stand DOWN. DO NOT SEND IN A BID.”
It’s not clear how quickly Kamensky realized this was a bad move. After all, he had competing fiduciary duties, to his clients and to his fellow creditors. Maybe it was right away. Maybe it wasn’t until Jefferies made clear it would have to disclose its conversations with him about the MyTheresa shares. Either way, when he got that second unwelcome phone call, Kamensky made things quite a bit worse.
When Jefferies disclosed its conversations with Mr. Kamensky, he urged it to back up his preferred version of events that the episode was a misunderstanding, unaware the phone call was being taped, according to the report.
“[I]f you’re going to continue to tell them what you just told me, I’m going to jail, okay?” he said on the call. “Because they’re going to say that I abused my position as a fiduciary, which I probably did, right? Maybe I should go to jail. But I’m asking you not to put me in jail.”
Well, Danny Boy, about that….
The report found “substantial evidence” that Mr. Kamensky, founder of Marble Ridge Capital LP, breached his fiduciary duties by using his pull with Jefferies to dissuade it from bidding for shares of MyTheresa, Neiman’s thriving e-commerce business…. The judge presiding over Neiman’s chapter 11 case has already called the allegations “alarming” and suggested that, if true, they could implicate criminal statutes covering bankruptcy proceedings.
[Kamensky] acknowledged he committed a “grave mistake” after a federal watchdog accused him of misconduct for trying to stop a competing bidder from buying some of the assets of bankrupt Neiman Marcus Group Inc…. Kamensky later told the U.S. Trustee, a bankruptcy court watchdog…. that contacting and “trying to influence a potential rival bidder for property of the bankruptcy estate was wholly inappropriate.”
Looks like we’ll find out just how a grave a mistake this was.
The Justice Department’s Office of the U.S. Trustee, which monitors the nation’s bankruptcy courts, said the report is preliminary and Mr. Kamensky hasn’t had the chance to respond or rebut the conclusions. The report suggested a formal proceeding in open court to determine any next steps.