Highland Sues 'Insubordinate' Ex-P.E. Chief Over 'Lies'

Apr 30 2012 | 1:52pm ET

Highland Capital Management wants its former private equity chief to shut his mouth, and is asking the Texas courts to force it closed.

The $20 billion alternative investments firm this month sued Patrick Daugherty, its head of stressed special situation and private equity until September, for breach of contract and defamation. The secretive firm, which knows its way around a courtroom, accuses Daugherty of spreading "lies" to Highland investors, portfolio companies and the media. It asked a Texas state court in Dallas for a permanent injunction against Daugherty.

According to the Highland complaint, which pulls no punches, Daugherty told the firm that "two strokes he suffered years earlier has left him with dead spots in his brain that impacted his mental competence and conduct." And that conduct included increasingly abusive behavior towards staff and being "belligerent to peers," even after his departure after 13 years with the firm: Highland said he continued to publicly berate Highland employees as "fucking idiots" after he left the firm.

In recent years, Highland said, Daugherty's performance weakened and he "became increasingly unmanageable, erratic and insubordinate." He quit when "Highland refused to accede to his unacceptable ultimatums and megalomaniacal demands regarding compensation;" the firm notes it paid him more than $26 million during his tenure.

Daugherty did not comment on the lawsuit. But Dealbreaker.com reports that last month he testified on behalf of Highland co-founder James Dondero's wife in their divorce proceedings. Daugherty reportedly told a judge that Dondero, who is claiming to be insolvent under Texas family law, planned to bring his net worth down as much as possible to minimize the payments he'd be required to make.


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