Probed Och-Ziff Exec. Sues Hedge Fund For $7.9M

Mar 22 2011 | 12:38pm ET

A former Morgan Stanley real estate executive under investigation by U.S. authorities has sued Och-Ziff Capital Management over his firing.

Zain Fancy alleges in both a lawsuit filed in Singapore and a London arbitration proceeding that Och-Ziff still owes him nearly $8 million after wrongfully firing him in October. Och-Ziff, which hired Fancy and three others from Morgan Stanley's real-estate team in 2008—paying Fancy a $10 million signing bonus and awarding him $35 million in restricted Och-Ziff shares—said that Fancy failed to disclose the pending criminal and regulatory investigations into alleged corruption at Morgan Stanley.

"Mr. Fancy's involvement in pending investigations, coupled with other factors unrelated to Och-Ziff, have prevented the parties from raising third-party capital for the venture and have rendered the venture unworkable," Och-Ziff CFO Joel Frank said in a court filing of the Och-Ziff Real Estate Singapore fund, of which Fancy was founding partner and executive managing director. "His actions have resulted in a breach of trust. No rational investor would commit capital in the face of uncertainty over the status of key team members. Any attempt to solicit capital without full and accurate disclosure as to the status of key members would have been reckless and perilous."

Fancy alleges a breach of his own: breach of partnership agreement in his arbitration proceeding against Och-Ziff Management Europe.

"These belated allegations are nothing more than a transparent attempt to renege on your clients' clear contractual obligations," Fancy's lawyer, Nish Shetty, wrote to Och-Ziff's lawyer in September, Bloomberg News reports.

Fancy isn't the only former Morgan Stanley executive caught up in the Department of Justice and Securities and Exchange Commission investigations: Roy Kwok, who joined Fancy at Och-Ziff as the founding partner of Och-Ziff Hong Kong, is also being probed, and has also left the hedge fund.

Och-Ziff is seeking to have the Singapore lawsuit ended in favor of the London arbitration proceedings, an effort Fancy opposes. A hearing is scheduled for Friday.

Fancy claims that Och-Ziff owes him $1 million in withheld pay and $6.9 million worth of stock.


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