Hedge Fund Sees 'Egregious Fraud' At Broadcaster

Oct 12 2010 | 1:06pm ET

Hedge fund R2 Investments is suing Citadel, alleging "a shocking display of corporate greed and dishonesty" and a "most egregious fraud."

Citadel Broadcasting, that is.

The Fort Worth, Texas-based hedge fund, part of Q Investments, blasted Citadel Broadcastings's management team and board of directors for awarding themselves $110 million in stock grants just months after exiting bankruptcy. That goes against the third-largest radio company's own reorganization plan, which called for awards to be made in options, rather than outright stock grants.

Those grants dilute R2's own tiny stake in Citadel Broadcasting, it alleges.

If Citadel Broadcasting is allowed to get away with it, "there wood be a new tag line in Corporate America: 'Attention all CEOs—not happy with your pay package? File your company for bankruptcy, mislead the judge about your true intentions immediately after you emerge from Chapter 11, and then you can become the highest-paid executive in your industry and potentially even become worth well over $100 million," the Citadel Broadcasting suit offers.

Citadel Broadcasting CDO Farid Suleman received have of the stock awards as part of "a disturbing game of quid pro quo," R2 alleges.

Citadel Broadcasting, which is not affiliated with Citadel Investment Group, denies the "misleading and inaccurate charges."

"The board of Citadel Broadcasting, which was appointed by the lenders, acted appropriately, within its authority under the equity incentive plan that was filed with the court and in the best interests of the company," Citadel said. "When the court reviews the record, we are confident this motion will be dismissed."


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.