Touradji Rejects Amaranth Claim, Says It Acted ‘Professionally’

Date: Thursday, September 24, 2009
Author: Chanyaporn Chanjaroen, Bloomberg.com

Touradji Capital Management LP said it acted “professionally and appropriately” in all transactions with Amaranth Advisors LLC, which is suing for at least $350 million over claims that include breach of contract and misappropriation of trade secrets.

“We will fight these scurrilous allegations vigorously,” Chief Executive Officer Gil Caffray wrote in a letter to investors dated yesterday, a copy of which was obtained by Bloomberg News. Armel Leslie, a spokesman for New York-based Touradji Capital, declined to comment today.

Amaranth, the hedge fund that lost $6.6 billion three years ago this month, sued Paul Touradji and his employees, alleging Touradji breached two contracts agreed to in September 2006 regarding the transfer and purchase of Amaranth’s base-metals portfolio, according to a complaint filed Sept. 18 in New York State Supreme Court in Manhattan.

“The purported basis for Amaranth’s lawsuit is unclear, as it was filed under a procedure that does not even require them to allege facts showing the basis for their claims,” Caffray wrote. Nick Maounis, founder of Amaranth, declined to comment through a spokesman.

Investors in Amaranth lost 60 percent of their money in 2006 over wrong-way bets on natural gas made by trader Brian Hunter. Amaranth is also suing JPMorgan Chase & Co., claiming the bank sabotaged two potential transactions in September 2006, one with Goldman Sachs Group Inc. and the other with Citadel Investment Group LLC, as the fund was collapsing.

Positive Returns

Maounis closed his firm following the losses and returned the remaining money to investors.

Touradji Capital Management invests about $2.7 billion in commodities and raw-materials companies. The firm’s Global Resources Master Fund, its largest, has delivered positive returns to investors every year since its 2005 inception.

Touradji and employees at his firm used the information “to recover profits obtained by defendants through improper trading practices and misuse of plaintiffs’ proprietary and confidential information,” according to Amaranth’s lawsuit.

Touradji is currently also facing a lawsuit from two former employees, Gentry Beach and Rob Vollero, over $25 million each in back pay. Beach’s father, Gary, who is a former business partner, is suing Touradji claiming that the hedge-fund manager pushed him out of a venture known as Playa Oil & Gas LP to drill for oil in Texas and Louisiana. Touradji says these suits are without merit.

‘Frivolous Litigation’

Amaranth’s action “is merely an offshoot of the frivolous litigation brought against the firm by two disgruntled former employees and one of their family members,” Caffray wrote.

In an April 15 deposition for the district court of Harris County, Texas, for the Playa case, Gentry Beach, citing his unidentified colleagues, said Paul Touradji signed a non-trade agreement with Amaranth so he could review their metals positions when Amaranth was shutting its fund during September and October 2006.

“From what I heard, Mr. Touradji then aggressively pressed these positions against them,” Beach said in the deposition.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profit from speculation on whether the price of assets will rise or fall.

The case is Amaranth LLC v. Touradji Capital Management LP, 09-602885, New York State Supreme Court in Manhattan.

To contact the reporters on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net