Bloomberg – Ellington Management Group LLC, the hedge-fund firm focused on mortgage bonds, sued Ameriquest Mortgage Co. and other ACC Capital Holdings units over soured subprime home loans.

Funds run by Old Greenwich, Connecticut-based Ellington saw the value of $354 million of investments in securities backed by the loans “largely lost” following misrepresentations about the debt’s risks, according to a complaint filed Jan. 14 in federal court in New York.

Ellington joins M&T Bank Corp. and HSH Nordbank AG in turning to the courts to recoup losses from bad mortgage bonds. Insurers including PMI Group Inc. and MBIA Inc. have sought to recover or block claims through lawsuits. Ameriquest’s lending failed to meet its own guidelines when it didn’t verify borrowers’ employment, ignored past late payments and misstated whether they lived in properties, according to the complaint.

The defendants’ “liability arises not from increasing default rates associated with a general economic downturn, but from their fraud — from lying to Ellington about the riskiness of the loans,” Ellington said in the complaint.

Defendants in the lawsuit against Ameriquest, parent ACC Capital Holdings and other related companies — once collectively the largest U.S. subprime lender — include businesses bought by Citigroup Inc. in 2007, according to the complaint. The suit didn’t name Citigroup.

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Tags: borrowers, citigroup, citigroup-inc, default rates, economic-downturn, ellington management group, group-llc, hsh nordbank ag, late payments, mbia, mbia inc, misrepresentations, mortgage bonds, mortgage co, old greenwich connecticut, pmi group inc, related-companies, subprime home loans, subprime lender

New York (HedgeCo.Net) – Two hedge funds are looking to oust William Dillard II, CEO of Dillard’s Inc., after poor performance and lagging stock prices. 

Barington Capital Group LP and Clinton Group Inc sent a letter to the SEC that was released yesterday, which asked the company to start to an immediate search for a new CEO.

"In our opinion, a management team with a comparable record of poor performance at any other company would have been fired long ago," the hedge funds said in the letter. 

In addition to sales declining over the course of the year, Moody’s Investors Service warned last week that it may cut Dillard’s credit ratings to junk status.

The hedge funds are also looking to replace some of the other family members who work for the company, saying they are "overpaid and under-qualified for the positions they hold and can be readily replaced with more talented retailers."

The hedge funds claim that William Dillard II makes far more than other CEOs at similar companies.  According to a report they cite from advisory firm Proxy Governance, William makes 54 percent above the average, while other executives at Dillard’s make 185 percent above the median. 

Dillard’s, in an attempt to avoid a proxy battle with the aggressive hedge funds, agreed to place four candidates from the fund onto the Board of Directors in April. 

The hedge funds own almost 6 percent of Dillard’s class A stock.  Dillard’s stock is divided into two shares, a move that William made almost four decades ago to guard against takeovers.

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

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Tags: bancassurer, brokerages, chief-executive, dan-hesse, distressed-companies, due-diligence-service, june-14, misery, new-money, new-york-times-co, poster-children, related-companies, volatility, world-of-pain

Here Is The City – Bloomberg reports that CEOs at Wall Street’s top five securities house earned a staggering $3bn between them from 2003 and 2007, during the time when the subprime and toxic securities timebomb was ticking away in the background. Goldman Sachs CEOs were paid the most in this period ($859m), followed by Bear Stearns ($609m).

And talking of Wall Street finest, former Merrill Lynch CEO Stan O’Neal (who bagged $172m in pay between 2003 – 2007), is said to be thinking of making a comeback. According to The Financial Times, O’Neal is considering joining Vision Capital Advisors, a small hedge fund and private equity firm.

Bloomberg also reports that JPMorgan Chase has acquired Washington Mutual’s branch network for $1.9bn, as the thrift was seized in what has been described as the largest bank failure in US history. JPMorgan will not acquire any of WaMu’s liabilities. CEO Jamie Dimon said: ‘This is a fabulous franchise. We think we got this at a price that protects us’.

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Tags: asyst-technologies-inc, bankruptcy-filing, bear-stearns-companies, board-of-directors, eliot-spitzer, investment-funds, investor-support, journalism, paul-touradji, pergam-finance, raanan-agus, related-companies, security-authorities, tribune-co, woolies