Highland Takes Issue With Ex-P.E. Chief's Plans

Mar 19 2013 | 12:46pm ET

Highland Capital Management's former private equity chief plans to launch a new firm, raising tensions in the already extremely-litigious relationship between him and his former employer.

Patrick Daugherty told the New York Post that he's readying his own firm with another former Highland executive, Greg Stuecheli. And Highland fears that Daugherty is planning to poach its clients, nearly a year after it accused him of spreading "lies" about it to investors and others.

Highland plans to bring up Daugherty's plans before the judge who granted the firm a temporary restraining order against him.

Highland sued Daugherty last year, accusing him of breach of contract and defamation. The firm said that Daugherty had been bad-mouthing it to clients, portfolio companies and the media, and alleged that "two strokes he suffered years earlier… left him with dead spots in his brain that impacted his mental competence and conduct."

Daugherty, who resigned from Highland in 2011, shot back with a countersuit for defamation, alleging that the disclosures about his health kept him from getting a new job. He later dropped that claim to avoid producing his medical records, but still accuses Highland of withholding some of his compensation.

Nor has the legal battle been limited to litigation between the two sides: Daugherty testified on behalf of Highland founder James Dondero's ex-wife in their divorce proceedings, telling the court that Dondero's claims of insolvency under Texas law were merely a ploy to minimize the payments he'd be required to make. Daugherty is also set to testify against Highland for CBRE Group, which Highland is suing over a bankrupt Nevada real-estate development.

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