West Palm Beach (HedgeCo.net) - Transport company, CSX Corporation announced that it has joined in  a civil action brought by the plaintiff, shareholder Deborah Donoghue, in federal court in New York to recover so-called "short-swing" profits under Section 16(b) of the Securities Exchange Act of 1934.

The Children’s Investment Fund and 3G Capital Partners LP are there in connection with their alleged purchases and sales of CSX securities. CSX is party to the suit in name only, which was brought for the benefit of CSX.

If approved by the court, CSX will receive $10 million from TCI and $1 million from 3G and the defendants will be released from claims of violations of Section 16(b) of the Securities Exchange Act. The settlement provides that counsel for the plaintiff will seek approval by the court for attorney’s fees and costs of up to $550,000, which will be paid from the proceeds of the settlement payable to CSX.

Editing by Alex Akesson

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New York (HedgeCo.Net) – CSX is finding themselves in the middle of another battle, this time with a shareholder who is suing the railroad company along with hedge funds TCI and 3G Capital Partners.

Shareholder Deborah Donoghue is seeking the recovery of “short swing” profits from sales conducted by the two hedge funds between August and September 2007. She is hoping to recover profits from the sale of shares by the funds, before they announced their plan to launch a proxy battle and shake up the Board of Directors.

Donoghue is claiming that TCI and 3G sold 2 million shares of CSX stock and within six months, bought a large amount of shares and derivatives equal to shares of CSX common stock at lower prices.

“Such profits are recoverable on behalf of CSX by plaintiff as a shareholder of CSX, the latter having failed or refused to act in its own right and for its own benefit,” stated the complaint.

Donoghue isn’t the only one who believes the hedge funds didn’t act in good faith.  CSX has been in a battle with the two funds ever since they exerted their controlling stakes to take over four board seats on the Jacksonville, Florida based company after a drawn out proxy battle.

CSX had argued that the funds “secretly coordinated” their fight to gain the seats on the board while failing to disclose their full stake in the company.  The judge eventually ruled with the hedge funds, allowing them to vote their shares at the company’s annual meeting in June.

Hedge funds are not required to report to the Securities and Exchange Commission, thus these “short-swing” profits were not publicized.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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