Pension Sues Highland Over 'Self-Interested' Deals

May 24 2011 | 1:15pm ET

The well of litigation stemming from the collapse of Highland Capital Management's Crusader fund has not yet run dry.

A Houston pension plan has sued Highland and JPMorgan Chase, which serviced the fund, accusing the two of effectively looting the fund. Highland has previously been sued by investors in the fund who accuse the firm of lying about the level of redemption requests prior to its collapse in 2008.

"Dozens of self-interested transactions" ordered by Highland founders James Dondero and Mark Okada left the firm's flagship "with poor quality assets that it would not have had if the partnership had been managed in the best interests of the partnership and its limited partners," the Houston Municipal Employees Pension System alleges. The plan, which invested $15 million in crusader, is seeking unspecified damages.

According to the lawsuit, Highland reduced its own stake in Crusader by more than 95% after it froze redemptions.

"In accomplishing this task, Highland stripped the master fund of its investment-grade assets, leaving it with only junk-rated (or unrated) investments," the lawsuit, filed in Delaware Chancery Court, alleges.

Highland said it was "extremely disappointed" by the lawsuit, which it characterized as the work of "a single law firm" seeking "to detail the continued hard work of over 100 investors."

"As highlighted by the recently-announced agreement among investors in the Highland Credit Strategies hedge fund, we are confident that an equitable solution that benefits all Crusader investors will be reached," the firm's spokesman, Armel Leslie, said.


In Depth

Q&A: Neil Azous Talks Global Macro Investing

Nov 24 2014 | 12:41pm ET

Neil Azous is the founder and managing member of Rareview Macro, an advisory firm...

Lifestyle

Griffin Selling Chicago Apartment

Nov 26 2014 | 11:40am ET

Citadel Investment Group’s Kenneth Griffin is making clear to his estranged wife...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

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.