Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
New York (HedgeCo.Net) – Former hedge fund manager turned ponzi-schemer Tom Petters is being sued by so many parties that the Minneapolis federal judge actually had to call a “timeout” yesterday.
Judge Ann Montgomery called the cease-fire after court-appointed receiver Doug Kelley pointed out that the dozens of mounting civil legal actions are interfering with their attempts to salvage some of Petter’s enterprises.
“We’re seeking some amount of breathing room to fulfill the receiver’s responsibilities,” law partner Steven Wolter told Judge Montgomery.
Petters multiple businesses, many of which are in bankruptcy, have been reduced to a single case. U.S. Bankruptcy Judge Gregory Kishel gave the order to consolidate 10 companies into one bankruptcy petition so that they may be easily dealt with.
The civil suits against Petters are coming from multiple states, with the count now over 30. Wolter argued that both time and money are issues when it comes to trying to find legal representation for the companies.
Petters Group Worldwide filed for Chapter 11 bankruptcy earlier this month after feds launched a probe into the alleged $3 billion scam orchestrated by Tom Petters. He was arrested and sent to jail on charges on money laundering, wire fraud, mail fraud and obstruction of justice.
For now, all of the civil suits are frozen until further notice. No new suits can be filed at this time.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Vindicator – A bankruptcy judge said Wednesday he may let Delphi pursue wider fraud claims against the Appaloosa Management hedge fund, which backed out of a deal to invest $2.55 billion in the auto supplier.
Appaloosa had led a group of investors to inject as much as $2.55 billion into Delphi in exchange for stock once it reorganized, but the investors withdrew from the deal in April. Delphi Corp. sued Appaloosa in May, accusing it of deliberately and secretly working to sabotage Delphi’s effort to satisfy a condition of their deal: that Delphi should raise $6.1 billion in exit financing to support its emergence from Chapter 11.
On Wednesday, lawyers for Appaloosa sought the right to improve its position in the lawsuit, but in doing so the hedge fund may have opened the door to wider charges.
Judge Robert Drain had ruled in July that Delphi could pursue a claim that Appaloosa had misrepresented its intentions. Delphi lawyers argued that Appaloosa manager David Tepper, a Goldman Sachs alum and well-known hedge fund manager, gave his verbal commitment to do the deal when he testified in December 2007. They described his testimony as a declaration that “a deal is a deal,” which to them meant that Appaloosa’s withdrawal constituted fraud.
Bloomberg – Lehman Brothers Holdings Inc., the U.S. investment bank holding company that filed the largest bankruptcy in history, faces objections to a proposed $1.75 billion sale of its broker-dealer unit to Barclays Plc.
Hedge fund Harbinger Capital Partners asked a U.S. bankruptcy judge to block the sale unless Lehman immediately discloses cash transfers it made just prior to its bankruptcy, including an alleged $5 billion transfer of cash from Lehman’s London office. Another two hedge funds, Bay Harbour Management LC and Amber Capital, filed papers alleging $8 billion was moved.
The objections continued to roll in as a hearing to approve the sale, scheduled for 4 p.m., was delayed as hundreds of participants and onlookers overcrowded a courtroom in U.S. Bankruptcy Court in Manhattan.
Lehman “must provide adequate information, and certify its accuracy, as to what cash has moved in and out of Lehman Brothers Inc. and debtor Lehman Brothers Holdings Inc.,” Harbinger said in court documents filed today with U.S. Bankruptcy Judge James Peck.
New York (HedgeCo.Net) – American auto parts maker Delphi has been given the green light to proceed with their suit against hedge fund Appaloosa Management.
U.S. Bankruptcy Judge Robert Drain denied a request by Appaloosa yesterday to dismiss the fraud and breach of contract lawsuit that Delphi had waged against them. Delphi is attempting to collect the $2.55 billion that was originally promised to them by Appaloosa as part of their plan to exit Chapter 11.
While Judge Drain did disregard some of Delphi’s complaints, sources say he rejected the arguments of Appaloosa, including the one that stated the agreement with Delphi only allows for damages of up to $250 million.
The money was part of a bigger, $6.1 billion refinancing strategy that was promised to Delphi through various investors. After $2 billion was granted by former parent company General Motors, Appaloosa got weary of the deal and cited an overdependence on GM. One day before the deadline to walk away, Appaloosa did just that, even though Delphi had attained the rest of the financing needed to solidify the deal.
The lawsuit is scheduled to go to trial next year.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
