Report: Loeb Detained In Cuba After '02 Car Accident

Oct 30 2013 | 11:44am ET

Daniel Loeb struck a child with his car during a 2002 vacation in Cuba and was detained in the country for several weeks, according to a new and not-at-all complimentary profile of the Third Point founder in Vanity Fair.

Loeb had travelled to the country—which is under a strict U.S. embargo—with friends for a long weekend. But, according to VF, the trip "took a dark turn" when Loeb hit a child. The magazine cites a breach-of-contract lawsuit filed by a former Third Point analyst that alleged "Cuban authorities had refused to allow him to leave."

According to his former friend, fellow hedge fund manager Robert Chapman, Loeb was confined to his hotel room after the accident. "I remember how scared Dan sounded when describing the incident involving his hitting a local Cuban kid with his car. I truly felt sorry for him when he told me he had found himself unable to leave the country, curled up in a ball on the floor of his room crying, promising God that he'd do anything if the Almighty got him out of his predicament." The incident is also recounted in an forthcoming book, House of Outrageous Fortune by Michael Gross, which alleges that he "ended up in jail until he was bailed out by another financier" seven weeks later.

Loeb acknowledged that he had been involved in an accident and that everything turned out fine after a legal hearing and a couple of extra weeks in Cuba. But his lawyer denied that he had ever been arrested or spent time in jail.

"The statements you attribute to Mr. Chapman, Gross and an 'unidentified source' are entirely untrue, defamatory and libelous, and will be treated as such," Matthew Dontzin told the New York Post. A friend of Loeb's, who says he was on the trip to Cuba, added, "I state categorically that Daniel was never in jail… and that the child involved in the accident was not killed."

In his interview with VF, Chapman did not stop with his description of the Cuba incident, although he may have been referring to it when he said, "I've heard it said that yoga is Dan's form of paying penance for what he does while outside the home, whether it be the office or elsewhere. It's like his way of self-purging."

"Given Dan's extraordinary success, his behavior can be extraordinarily odd, and coming from me that says something," Chapman said. "If I had to guess, he sees himself as a phenomenal filterer of other people's investment ideas, and maybe that's the source of a behavior normally attendant on someone hopelessly insecure."

Others attribute that behavior to what might be called sociopathy. A longtime colleague told VF that Loeb "can write the most obnoxious letters on the planet, make shit up" because he does "not really care" whether or not he hurts people.

His letters "were juvenile, sophomoric and cringe-making. Horrible. If you're a decent member of society," the colleague said, you don't do "shit like that. But he did. That was his business strategy."

"Other people—most of us—have certain values and certain norms, and there are certain boundaries we just wouldn't cross. And he just obviously doesn't have those same kind of limitations. Never has."

"We all know what his niche is: He is just long and loud," another Wall Streeter who has known Loeb for decades said.

"He was smart to occupy a place that was really left vacant: All the private-equity funds and the banks had to get out of hostile deals, and it was left to the guys who didn't give a crap, knew how to do it, and had nothing that they were compromising or putting in jeopardy by taking on those powers. Carl Icahn didn't give a fuck. Dan Loeb didn't give a fuck. I don't think anyone's ever said Dan's a really, really brilliant guy, but this is what the hedge fund world allows you to be if you're massively ambitious and you're kind of really, really, really focused."

"Here's the thing about Dan. He's smart not in the way of some 180 I.Q. kid from MIT who immediately grasps complex derivatives or investment scenarios," Chapman said. "His brain is not wired that way. However, he does have unparalleled judgment on when, why and how much capital to deploy in a particular investment—what's going to work and what's not going to work."

Usually, anyway: Chapman said he thinks Loeb allowed Pershing Square Capital Management's William Ackman to outthink him on nutritional supplements company Herbalife, a position Loeb exited far short of his price target for the stock.

"I think Loeb let the Ackman Jedi mind trick penetrate his mind and then just panicked," Chapman said. "He may even have sold his stock to Icahn without knowing it. In this one case, Loeb's instinct failed him."

A source who described himself as a friend of Loeb's told VF that Loeb's name-calling of Ackman is "massively stupid on multiple dimensions" and a sign that Loeb is allowing his baser instincts free rein.

"Loeb very successfully for many years toned things down in a way that a lot of institutional investors would think, OK, whatever. So it's like he's going back; he's undoing 10 years of hard work to present a more polished, professional image."

VF tells of a February encounter between the two men—at its own Academy Awards party—in which Ackman approached Loeb, said hello, and then told him that "you really shouldn't have done that," in reference to Loeb's attempt to force a short-squeeze in Herbalife, which Ackman has called a pyramid scheme.

"Why? I made $50 million. What's wrong with that?" Loeb shot back. The two former friends have not spoken since.

"Why would you go make an enemy out of Bill Ackman?" the friend asked.

The VF article posits two possible answers to that question: That it's who Loeb is, and that, having survived major losses during the financial crisis and become more successful than ever, his ego is as large as ever.

"When Dan's relaxed—comfortable—he's vulgar," a Loeb associate said. "Like what you'd imagine in an investment community: 'By the way, show this—stick it up his ass.' 'Fuck him.' 'I ain't taking on this piece of shit.'"

The friend says that Loeb "never, ever in a million years" would have sought to publicly humiliate someone "back in 2008 when he was down nearly 50% and nearly blew up. That was a humble Dan Loeb, who never would have gone out making enemies needlessly."

"The guy almost went out of business in 2008," another hedge fund manager said. "I think what happened was he had a couple of good years. He bounced back. He put up some good numbers, and I just think his ego has gotten so out of control."

"With the fund doing well, I just think it's completely gone to his head, and he surrounds himself with a bunch of sycophants."

VF describes a hedge fund maven dreaming of nearly tripling his assets under management to $40 billion, trying to get reporters fired and picking fights with powerful institutional investors. One hedge fund manager called him "the Kanye [West] of Wall Street—crazy insecure despite the enormous success and celebrity."

"I think Loeb has got an enormous ego," another hedge-fund competitor said. "I think he's got a bit of a Napoleonic thing. And I think he's a very calculating, Machiavellian guy."

"What happens to some people when they make a ton of money is they get this feeling of invulnerability, and I can do anything, say anything, behave any way I want, and I can get away with it."


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