The Delaware Supreme Court ruled that investors in failed hedge funds will be allowed to investigate their losses as a group while coordinating potential legal actions, according to a statement issued Tuesday, August 17, by the Houston law firm Ahmad, Zavitsanos & Anaipakos.
Ahmad, Zavitsanos represents Brown Investment Management, L.P., a limited partner that lost its entire investment with Parkcentral Global, a hedge fund, in less than three months. The statement said Parkcentral Global, based in Plano, Texas, is now a liquidated fund run by affiliates of H. Ross Perot. It said that court documents put Parkcentral Global’s losses at approximately $2.6 billion.
Brown Investment sued Parkcentral Global after the company refused to release a list of its investors, arguing that the list was protected by federal law. However, in the ruling handed down on August 12, Delaware’s highest civil court ruled that fellow investors have the right to know each other’s identities.
“Hedge funds exploded in the last decade because pooled investments provide a largely unregulated way for hedge fund managers to make money for themselves,” Ahmad, Zavitsanos attorney Amir H. Alavi who tried the case for Brown Investment, said in the statement. “This ruling helps those who lost money in poorly managed funds to find other investors and join together to take legal action. Hedge funds where managers lacked diligence and proper risk analysis can no longer use divide-and-conquer tactics to avoid responsibility for losses.”
The Delaware Supreme Court opinion affirmed an earlier ruling from the Delaware Court of Chancery. The case is called Parkcentral Global, L.P. v. Brown Investment Management, L.P., No. 288,2010.
Alavi said that Brown Investment has not participated in the class action lawsuit filed in the U.S. District Court for the Northern District of Texas against Parkcentral Global, but is investigating the hedge fund’s auditors and other third parties.
Alavi and his partner Demetrios Anaipakos have been handling disputes against hedge funds and private equity firms for more than a decade, the statement said.
Michael S. Fischer ([email protected]) is a New York-based financial writer and editor and a frequent contributor to WealthManagerWeb.com.