2008-07-27wsj.com

The former manager of a Citigroup Inc. hedge fund that collapsed this year has filed a complaint accusing company executives of causing the fund's demise, according to people familiar with the matter.

...

The dispute, which seeks unspecified damages from Citi for allegedly wrongfully forcing out Mr. Pickett, centers on the hedge-fund manager's bid last summer for a big package of loans. Mr. Pickett, who was based in London, tried to back out, saying that the loan terms had changed, making them less attractive.

In the complaint, Mr. Pickett claims top Citigroup executives caved in to the demands of investment banks in the loan deal, ignoring the financial interests of CSO's investors, according to people familiar with the matter. CSO eventually went ahead with the purchase, even though the loans were trading below their face value. Mr. Pickett claims the move saddled CSO with billions of dollars in troubled loans, undermining the hedge fund.

File this in "why its bad for banks to be running hedge funds".


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