Highland Denies Divorce Claims, Attacks Ex-Exec.

Nov 22 2013 | 10:10am ET

His divorce may be a "private matter," but that doesn't mean Highland Capital Management chief James Dondero can't issue a press release about it.

The missive, which comes a month after what Highland called "inaccurate" coverage by the New York Post, is ostensibly designed to correct that reporting. But it amounts primarily to an attack on former Highland executive Patrick Daugherty, whom the firm accuses of defaming it and who in turn accuses the firm of defaming him.

Daugherty really earned Dondero's ire by testifying on behalf of Rebecca Dondero in the divorce trial, alleging that Dondero had urged him to lie as part of his effort to ensure his wife got nothing in the divorce. But, according to Highland, Daugherty did much more.

"Based on observations of those in the courtroom, he worked closely with Ms. Dondero's legal team in jury selection and conferred with them throughout the trial," the hedge fund alleges, noting that Daugherty was in court on both the first and second days of the trial but did not testify until the afternoon of the third.

"His courtroom testimony was confused, bitter and largely irrelevant," Highland went on. "Indeed, when questioned regarding his knowledge of the primary issue in the case, the prenuptial agreement, he vaguely offered: 'I think he [Mr. Dondero] talked to me about certain aspects of it. He never really talked to me about it. "I want to talk to you about the premarital agreement," he [Mr. Dondero] never said that. We just talked about aspects of the prenatal agreement. Did I say prenatal? I'm sorry. Premarital agreement."

"At one point while he was on the witness stand, Mr. Daugherty asked: 'Can you please repeat the question? I flashed out there for a moment."

Highland added that it believes that Daugherty and Rebecca Dondero were the sources for the Post article, which alleged that Dondero was seeking to have the prenup annulled in court. In the presser, Highland denied the claim.

"Mr. Dondero has always sought to have the prenuptial agreement"—which caps his wife's payout at $5 million—"enforced," it wrote. "Becky Dondero is the only party who at any time attempted to invalidate the prenuptial agreement." According to Highland, "the jury agreed that Ms. Dondero repeatedly attempted to nullify the prenuptial agreement and that she should not receive damages on her claims that Mr. Dondero breached the agreement," and that "Mr. Dondero never hid assets and never stated that he had any plans to do so."


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