August 25, 2006
Hedge Fund Drama, Hollywood Style
And you thought film stars had it all. Well, in a way they do – common folks don’t invest in hedge funds so they don’t have to face the kind of problems Sylvester Stallone is going through. But when you come to think of it, he and a few others like John Cusack are not suffering because of losses. The ghost of a failed hedge fund has come back to haunt them – and this is quite peculiar even in the quirky world of hedge funds.
So, let me get down to details: In 1997, the actor invested $2.5 million in a private investment partnership called Lipper Convertibles. Four years later, with his statements showing the investment had swelled to about $3.8 million, he cashed out. Fellow actor John Cusack also walked away with big gains, as did former New York City Mayor Ed Koch and a trust fund for the children of investor Henry Kravis. Now, they are all being sued to give money back. Post-gazette.com reports:
What none realized, according to their lawyers, was that Lipper never made all that money. A portfolio manager had inflated profits by at least 40 percent, Lipper discovered in 2002. "We want all the money to be put back in the pool, so we can divvy it up equitably among all the partners," says Thomas Dubbs, an attorney representing the federal trustee overseeing Lipper.
Read more: Failed hedge fund haunts celebrities
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