Citadel Has Votes For E*Trade Special Meeting

Jul 28 2011 | 12:52pm ET

A fellow hedge fund has, at one fell swoop, given Citadel Investment Group all of the support it needs to force E*Trade Financial to hold a special shareholders meeting.

Smithwood Partners' JMB Capital Partners will back Citadel's call for such a meeting. And it owns more than 1% of the troubled online brokerage, which, combined with Citadel's 9.8% stake, gives the two hedge funds enough votes to make it happen.

"Ken Griffin will get my proxy," JMB's Jonathan Brooks told Dow Jones Newswires, referring to Citadel's founder and a member of E*Trade's board of directors. "What Ken is trying to do is drive an independent process."

Citadel may yet get even more support: Omega Advisors' Leon Cooperman has said he backs Citadel's demands, but has not specifically said he'd support forcing a shareholder meeting. Omega owns about 2.4% of E*Trade's shares.

Citadel has called for E*Trade to seek a sale, get ride of two board members and do away with its staggered board structure. E*Trade this week hired Morgan Stanley to investigate the former, but has rejected the latter two demands, as well as the demand for a special meeting.

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