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New York (HedgeCo.Net) - The hedge fund formerly run by the late Michael Klein has been sued by two individuals who owned a mortgage lending business in which the fund had a stake.
John and Kitty Gaiser are suing California-based Pacificor after the fund allegedly “misused a position of trust and control in order to attempt to take control of and acquire – without compensation – John and Kitty Gaiser’s ownership of Quality Home Loans,” according to a statement made by the Gaiser’s legal team. According to the Gaisers, Quality Home Loans filed for Chapter 11 bankruptcy protection, at which time the hedge fund acquired the business.
“It is our hope that this lawsuit will rectify the massive damage done to the Gaisers by the named defendants,” said their lawyer John Edgar. “We will look forward to proving these damages at trial.”
Pacificor is finding themselves in the middle of several lawsuits ever since Klein and his daughter were killed in plane crash last December over a Panama forest. The Sorenson Trust and Relief Return International, who had $24 million tied up in the hedge fund, is suing over a promise that Klein allegedly made before his death.
According to the company, Klein made a verbal promise to the company, saying they could still withdraw their investment if given notice by December 31, 2007. When they moved to withdraw $14 million from the fund and redeem $10 million in stock on December 27th, they were denied by Pacificor after the fund stated they had no knowledge of the promise made by Klein.
In addition to the suit, Klein’s estate is also being sued by his ex-wife over their daughter’s death and by the family of the daughter’s friend, who was the only survivor of the crash.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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
FT - Reuters - Fortress Investment Group LLC, one of the few publicly traded managers of private equity and hedge funds, is taking action to keep two of its companies afloat, the Financial Times said, quoting people familiar with the situation.
Fortress is struggling to preserve the value of its investments in Intrawest, a ski resort company based in Canada that has $1.68 billion in debt due on October 23, and Gagfah, a German residential real estate group that is seeking to raise additional equity to comply with the terms of its debt, the paper reported on its Website.
People familiar with Fortress say there is a low probability Intrawest will file for Chapter 11 bankruptcy protection, the Financial Times said.
CNNMoney.com - Hedge funds were leaving the prime brokerage business of Lehman Bros. (LEH) long before Lehman filed for Chapter 11 bankruptcy Sunday, and now, business there has all but stopped, according to sources.
But in certain areas, like the statistical arbitrage and repurchase, or repo markets, Lehman was and still is a top player. What happens to the prime brokerage is a complicated question, because most of that business is located in the U.K. While Lehman included its prime brokerage as part of its bankruptcy, it is not thought to be subject to the laws of Chapter 11 since the business is in the U.K.
Lehman’s prime brokerage, which like others lends money and securities to hedge funds as well as provides administrative services from back-office help to processing trades, was a key revenue-earner for the bank as recently as earlier this year. In its first-quarter earnings report in March, Lehman had reported a 38% year-over-year revenue increase in its securities service unit, which includes prime brokerage. At that time, it said it had $194 billion in hedge fund balances.
But as the investment bank started stumbling more and more the past few months - along with the rest of the financial services industry - Lehman started losing all or part of the business of hedge fund customers afraid of the counterparty risk attached with dealing with Lehman.
CFO.com - Even hedge funds are not immune to the credit crunch. A small hedge fund that provided short-term debt to companies has filed for Chapter 11 bankruptcy protection.
Greenwich, Connecticut-based SageCrest Finance, managed by Windmill Management, said in its Chapter 11 petition filed in U.S. bankruptcy court that it had listed assets of $50 million to $100 million, and debt between $1 million and $10 million, reported Reuters. The fund had about $1 billion in assets under management as recently as a year ago, according to hedgefund.net.
In fact, the website points out that the credit crunch put the squeeze on SageCrest’s business strategy — which is providing asset-backed specialty financing to smaller private companies that have been closed out of traditional sources of capital. Many of its projects involved extending art-, real estate-, and structured settlement-based loans.
West Palm Beach (HedgeCo.net) - In an effort to head off a forced asset sale, Windmill Management’s SageCrest Finance and SageCrest II filed for Chapter 11 bankruptcy after its assets fell sharply.
The hedge fund filed at U.S. Bankruptcy Court in Bridgeport, Conn. In a letter to investors, The fund said that the bankruptcy process would give SageCrest the time necessary to conduct an orderly liquidation of their assets to maximise the return to investors.
The fund described its investment strategy as making short-term loans to small- and mid-sized firms that cannot secure them from banks and specialty lenders. "Our position in a market where lending opportunities continue to outpace sources of capital provides an ideal point of departure for growth." The SageCrest website says, "Our investments target asset-rich and undervalued situations overlooked by, and with limited access to, the mainstream capital markets."
In its bankruptcy filing, SageCrest claimed fewer than 49 creditors and debts of between $1 million and $10 million. The hedge fund, which once boasted assets of as much as $650 million, said it now had between $50 million and $100 million.
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New York (HedgeCo.Net) - Greenwich-based hedge fund SageCrest Finance has filed for Chapter 11 bankruptcy protection. The credit opportunity fund, which grants short-term loan to companies left with few financing alternatives, said its recent losses were due to the condition of the debt markets coupled with mounting lawsuits.
The fund once managed around $900 million. Current assets are listed at $50-$100 million. In addition to providing short term capital to businesses, SageCrest also extended loans to plaintiffs in slip-and-fall lawsuits. They also dabbled in the art world and are caught in a nasty battle mired with scandal to retrieve $40 million which they claim is owed to them.
SageCrest is run by Alan and Philip Morton. The fund has had its recent share of bad press, with two investors suing the company for various reasons this year. Westerly Capital filed a suit in June claiming the managers ran the fund to their own benefit and to the detriment of its clients. This followed an earlier suit by Wood Creek Capital Management, who claimed that SageCrest did not adhere to its redemption policy.
In a petition filed on Sunday in U.S. Bankruptcy Court in Connecticut, SageCrest listed debts in the range of $1 million to $10 million.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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