Thursday, 31 July 2014
Last updated 17 hours ago
Aug 20 2013 | 11:29am ET
Former General Electric CEO Jack Welch has lost a legal battle with an old friend over a $7 million hedge fund investment.
Welch sued MLT Capital's Daniel Barach, a former classmate at Harvard Business School, in the wake of big losses at the hedge fund. The legendary business executive faulted Barach for not warning investors about a dispute he had with his landlord—information that he claimed would have kept him from investing in MLT in 2003.
But Massachusetts Superior Court Judge Christine Roach granted summary judgment in Barach's favor, writing that "personal allegations in an unadjudicated civil court action, not involving the subject investment or linked to the business experience of the fund or its manager" are "immaterial to a reasonable investor."
"The court basically adhered to an established line that the factors it should consider are those that relate to the business, rather than looking more broadly at character concerns or things of that nature," Barach's lawyer, Kevin O'Connor, told New England In-House.
Welch invested in MLT after speaking with Barach at a social event. The private-placement memorandum, dated 1997, noted that Barach had been the subject of no administrative, civil or criminal actions.
That changed in 1999, when Barach's landlord refused to extend his lease for a few weeks and sued the hedge fund manager, calling him difficult and vindictive. But the case never went before a hearing and settled on terms favorable to Barach within weeks. Barach denied the landlord's claims.
"The 1999 action against Barach and his wife was long concluded by the time Welch considered investing in MLT Capital," Roach wrote. "The parties to the undisclosed litigation had only a personal, landlord-tenant relationship."
Welch only sued Barach after MLT's losses and Barach's decision in 2008 to shutter the fund. But Roach noted, "Barach's litigation did not arise in connection with his responsibility for the fund's operations and activities, and in no way affected the value of investments in MLT Capital. And nothing in the record suggests that the decline of MLT Capital was in any way related to Barach's integrity or character."
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…