Four hedge funds' settlement with creditors of the former General Motors was anything but an altruistic deal to end "contentious, time-consuming and expensive litigation," federal prosecutors say.
The U.S. Attorney's Office in Manhattan has objected to the hedge funds' request for $1.5 million from the "old GM" estate to cover their legal fees. The prosecutors wrote that, far from making a "substantial contribution" to that estate, "they took self-interested steps to seek an advantageous resolution of their disputes with the estate."
The hedge funds, including Elliott Management, Fortress Investment Group and Paulson & Co., agreed to drop $1.13 billion in claims against old GM. But in exchange, they got to keep $367 million they received from GM Canada in 2009 and $50 million from the "new" GM, created in the wake of the company's bankruptcy and bailout by the federal government, in addition to more than $2 billion in outstanding claims against old GM.
A federal bankruptcy court will consider the hedge funds' request on Oct. 21.