Judge Orders Hedge Fund To Return Browns Owner's Money

Aug 9 2011 | 1:24pm ET

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.

In Depth

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


U.S. Trust's Beard: The Rapid Growth of the Art Lending Industry

Oct 7 2016 | 10:55pm ET

Alternative investment managers have emerged as some of the most significant art...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...