A hedge fund helmed by a former Carl Icahn protégé has been ordered to return tens of millions of dollars to its only outside investor, sports tycoon Randy Lerner.
A Delaware Chancery Court judge handed Lerner a resounding victory in the case, ordering "a remedy requiring the immediate return" of Lerner's remaining capital and finding that Paige Capital Management had been holding on to Lerner's money simply to earn management fees. Judge Leo Strine also ordered Paige to pay interest on the money for the period during which it refused to pay out the redemption, which they filed in October 2009.
Paige denied that redemption request, citing a provision that bars investors from withdrawing more than 20% of the hedge fund's total capital. Lerner's $40 million accounted for 99.9% of Paige's assets.
Lerner, who owns football's Cleveland Browns and English soocer's Aston Villa Football Club, argued that he had waited until the end of his three-year lockup to pull the money. He rejected a March settlement offer of $3 million.
"The discretion granted to hedge fund manager to determine whether to waive the gates is a fiduciary authority that must be used for the benefit of those who the hedge fund is intended to benefit and not for the selfish interest of the manager," Strine ruled. Paige had been collecting some $400,000 per year in management fees.
Paige returned 20% of Lerner's money in November under its reading of its seed agreement with Lerner.