A Roundup Of The Latest Litigation In Hedge Fund Land

Aug 11 2006 | 12:00am ET

It may be the year of the running hedge fund fraudster, but the boys in blue seem to have a handle on tracking them down. In May, authorities tracked down Kirk Wright, who allegedly defrauded investors out of more than $100 million, in Miami Beach after six weeks on the lam. Now, they’ve caught the scent of Angelo Haligiannis, who has been convicted of swindling investors in his Sterling Waters Group hedge fund out of $78 million.

Haligiannis disappeared from the corner of 11th Avenue and West 39th Street in Manhattan on the eve of his sentencing hearing in January. He faced up to a decade behind bars, but he slipped away, cutting off the ankle bracelet that had been tracking him and leaving it in his abandoned Jeep Cherokee. The New York Post reports that after eight months on the run with at least $15 million in stolen cash, the Feds may be closing in.

His drivers license surfaced recently at a casino in Greece, and the U.S. marshals are tracking down those who have been helping him hide. Haligiannis suffers from neurofibromatosis, a disease in which tumors attack the nervous system, and the fugitive needs at least five expensive chemotherapy medications a day to stay alive.

“No one can run without help,” U.S. Marshal Joseph Guccione told the Post. “He has a network of supporters.”

In other news, the U.S. District Court for the Northern District of Texas has dismissed a suit filed against Highland Capital Management by Motient Corp., which accused the hedge fund of making false and misleading statements about the firm. The court ruled that Motient “offered no convincing reason” to award it damages, saying it failed to provide the necessary facts.

Not content just to win, Dallas-based Highland rubbed a little salt in the wound, releasing a statement that said, “This ruling further underscores our belief that Motient’s management has not acted in the best interests of its stockholders and has not adequately explained to investors many of its actions. Moreover, we believe this is another example of Motient’s lack of transparency.”

And finally, Paul Flynn has had a lot at stake lately, including $2 million that the Securities and Exchange Commission was demanding from him as well as his right to work in the financial world, but Administrative Law Judge Robert Mahoney has dismissed charges that Flynn helped Security Trust Co. and two hedge funds engage in late-trading and market-timing of mutual funds. At the time of the alleged dirty deeds, Flynn was a managing director with the Canadian Imperial Bank of Commerce.

“I conclude that Flynn was not aware of and did not substantially assist the hedge funds’ and STC’s illegal activities,” Mahoney wrote in the ruling. The case against Flynn originated with New York Attorney General Eliot Spitzer, but he dropped criminal charges against Flynn last year after CIBC agreed to pay $125 million to settle the case.


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