Inside the ugly dispute between a hedge fund and its founder, who elevated his children’ former camp counselor to CEO

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The hedge fund agency previously generally known as Och-Ziff “deteriorated” beneath the “mismanagement” of its founder Daniel Och, forcing those that succeeded him to spend years stabilizing the Wall Street agency, the corporate mentioned in court docket filings. 

Och’s dealing with of a 2016 African bribery scandal involving the agency now rebranded as Sculptor Capital Management Inc. broken the fund’s enterprise and stability sheet whereas leaving staffers reeling, legal professionals mentioned Oct. 19 as a part of a authorized dispute over whether or not Och can get entry to the agency’s inside recordsdata.

Och, amongst Sculptor’s largest shareholders, desires a Delaware choose to order the agency handy over paperwork detailing its faltering efficiency and administrators’ December determination to award Jimmy Levin, who took over as chief govt final 12 months, greater than $145 million in compensation. A trial over the data demand is scheduled to kick off Dec. 16 in Delaware Chancery Court.

Sculptor attorneys say Levin’s former mentor is misusing the so-called books and data request to smear him and expunge the file of Och’s conduct “by creating a false narrative in which he is the savior of the company and is protecting it from its current management.” Such document demands are sometimes made previous to the submitting of a substantive lawsuit in Delaware over a authorized dispute.

Representatives for Sculptor and Och declined to touch upon the filings. The lawsuit, filed by Och and a gaggle of different former executives of the agency, focuses on Levin’s elevation to CEO and the way the board decided his pay.

Unexpected Decision

Och co-founded the agency in 1994 and constructed it right into a hedge fund powerhouse with belongings of just about $50 billion at its peak. But Och-Ziff’s misconduct in Africa — the topic of a prolonged bribery probe and eventual settlement with US authorities — triggered a cruel bleed of belongings and personnel. Och stepped down from his function as CEO in 2018 and tapped Robert Shafir, an outsider from the banking world, to steer the agency over Levin, who was co-chief funding officer on the time. The determination caught many off guard.

Still, Levin, whose relationship with Och goes again to his days as a counselor and water-skiing coach at a camp the place the billionaire’s youngsters spent a part of their summer season, finally rose to the highest and took over as CEO in 2021. His ascension was accompanied by sizable pay packages that prompted disputes amongst board members.

Och and the opposite former executives are actually probing whether or not board members violated authorized duties by failing to weigh different CEO candidates or do correct succession planning. They’ve additionally pointed to the departures of seven administrators since January 2020, together with 5 who resigned in the course of their phrases. Some of these board members backed Och’s considerations about Levin’s pay.

‘Near the Bottom’

Sculptor’s lagging efficiency is fueling Och’s questions. In his personal submitting Wednesday, the billionaire mentioned the agency’s funding efficiency ranks “near the bottom of the pack among its peers” and its inventory worth has lagged because the board awarded Levin his “massive pay package.”

Sculptor’s flagship hedge fund is down 13.9% this 12 months by way of September, in response to an individual acquainted with the matter, lagging the typical hedge fund. Shares of the agency have plunged 56% this 12 months to $9.24 as of finish of buying and selling Friday.

Sculptor says Och is concentrating on Levin for his efforts to resurrect the agency within the wake of the bribery scandal, implement governance reforms and strengthen its stability sheet by looking for monetary concessions from Och, who retaliated by vetoing a call by the board to seat Levin as CEO in 2017.

Soapbox

Och’s animus has turned the comparatively routine file request into a part of his “blood feud” along with his former protégé, Sculptor mentioned within the submitting. The agency says that Och ought to produce paperwork stretching again six years to “probe the founders’ historical animus.”

“Sculptor pleads plaintiffs lack a proper purpose,” in looking for the inner recordsdata, in response to the submitting. “Mr. Och and his co-plaintiffs — all of whom have good reason to be loyal to the man who made them rich — are using this litigation as a soapbox in their vendetta against the company and Mr. Levin.”

Under Delaware regulation, traders should present they’ve a official goal for requesting inside firm recordsdata. Personal vendettas don’t meet that take a look at.

For Och’s half, he says that Levin is overreaching in demanding such a variety of paperwork from him to forged doubt on his motives for looking for inside data. Och solely desires recordsdata going again about eight months, in response to court docket filings.

The case is Daniel Och v. Sculptor Capital Management Inc., 22-0748, Delaware Chancery Court (Georgetown)

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