Investor sues Perot Family Trust over hedge fund that went from being worth billions to 'less than z

Date: Thursday, April 30, 2009
Author: Gary Jacobson and Brendan Case, The Dallas Morning News

An investor in a Perot family hedge fund has sued the Perot Family Trust and several related parties, saying they grossly mismanaged the fund, which went bust in November after starting the year with $2.5 billion in net assets.

Southern Avenue Partners LP said the fund – Bermuda-chartered Parkcentral Global Hub Ltd. – collapsed despite reassurances to investors that its trading strategies would protect it from deep losses. The hedge fund didn't hedge, the complaint alleges.

"As a result of defendants' breach of fiduciary duty, the Global Fund imploded," said the lawsuit, referring to Parkcentral Global Hub. "The Global Fund's net asset value went from over $2.5 billion to less than zero."

Eddie Reeves, a spokesman for the Perot operations, denied the allegations in the lawsuit.

"All our activities and operations were, of course, aboveboard and in accordance with the utmost principles of integrity," he said.

"Parkcentral always provided investors with timely and accurate information about its investment activities, including during the period of unprecedented market disruption that ultimately forced the liquidation of Parkcentral Global," he said.

Reeves said the allegations would be found to be "demonstrably false and baseless."

Perot family members were the largest investors in the fund and suffered the largest losses, he said. Billionaire Ross Perot Sr. ran for president twice. His son, Ross Perot Jr., also is a successful businessman.

Last fall, one of the worst financial crises in decades roiled markets worldwide, damaging or destroying numerous investment funds.

Global Hub lost $300 million in a single day in November.

Southern said it wants the lawsuit, which was filed Monday in federal court in Dallas, to represent investors as a class. An attorney for Southern did not return phone and e-mail messages.

Perot money managers formed Parkcentral Global Hub in 2002 with $56 million in cash, Southern said in its lawsuit.

"Defendants marketed the Global Fund as a once-in-a-lifetime opportunity to have access to the same money management team (and proprietary trading techniques and strategies) used by the Perot family," the lawsuit said.

Investors paid more than $305 million in fees to the defendants from the fund's inception through November 2008, the lawsuit said.

J.P. Morgan Chase & Co. sued the fund in November, saying it was owed more than $700 million.