Alleged Lying, Bullying, Compliance-Ignoring, And Possible Fraud No Reason For Hedge Fund Not To Invest $50 Million With Outgoing Portfolio Manager
Alleged Lying, Bullying, Compliance-Ignoring And Possible Fraud No Reason For Hedge Fund Not To Invest $50 Million With Outgoing Portfolio ManagerAllegedly. And, relatedly, Robert Gagliardi would still like the rest of his bonus.- Author:Jon Shazar
- Publish date:Dec 15, 2022
Allegedly. And, relatedly, Robert Gagliardi would still like the rest of his bonus.
Evolution Capital Management says the matter of portfolio manager Robert Gagliardi’s tenure at the firm is fairly straightforward. He joined the hedge fund last April and did well enough in his 11 months at the firm to earn a nearly $6 million bonus.
Now, short stints with employers isn’t unusual for Gagliardi: Back in 2015, he spent all of two months and two days with Cheyne Capital. But Gagliardi’s time with Evolution was eventful, all the same. According to Evolution, in November of last year, Gagliardi told the firm he lost his cell phone on a flight to Los Angeles. Two days later, he told the firm that wasn’t quite true. He had, in fact, lost his phone when the U.S. Marshals seized it as part of federal prosecutors’ probe into whether block trading is just a fancy institutional name for insider trading, and replaced it with a subpoena to testify before a grand jury about the same.
Of course, lots of people have been caught up in this dragnet, and most if not all of them will not be charged with any wrongdoing, as, to date, Gagliardi has not been. And so, as far as the matter of his employment was concerned, the crime was not any still merely potential and alleged securities fraud, but the crime of lying to one’s boss.
Notably, however, November is not 11 months after April. March is, which is when Gagliardi was finally fired, ostensibly for lying to his boss, but also because Evolution itself had been subpoenaed in the matter and began to worry about how being part of a protracted federal securities fraud case might look to investors. Still, for its trouble, Evolution would like its $6 million back—and definitely would not like to pay Gagliardi the $7.5 million he says he’s still owed in bonuses.
Thing is, Gagliardi also says, in between November and February, Evolution acted awfully strange for a firm ostensibly concerned with Gagliardi’s alleged violation of its trust and reputation—in addition to its stated concerns about Gagliardi’s “extreme” combativeness with colleagues and general disregard for matters compliance and risk management.
Gagliardi’s attorneys said ECM’s claims are “a transparent power play to overburden a former employee in his effort to seek compensation,” according to a motion they filed Dec. 12 to dismiss the New York suit. The misconduct allegations are false, his lawyers said.
“To the contrary, ECM continued to employ Mr. Gagliardi, paid him a $5.96 million bonus and offered him a $50 million investment” to establish a new hedge fund before he left the company, according to the filing…. According to Gagliardi’s filing, even months after ECM knew of the block-trading probe, it had offered to invest in his new venture.
In Hedge Fund Pay Dispute, a Portfolio Manager Denies Misconduct [Bloomberg]
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Tagsterms:block tradesCheyne Capital ManagementfraudlitigationHedge FundsbonusesTwo SideslawRobert GagliardifiringsEvolution Capital Managementinsider-tradingU.S. Marshals ServiceCompensationcrime
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Originally posted on: https://dealbreaker.com/2022/12/alleged-lying-bullying-compliance-ignoring-and-possible-fraud-no-reason-for-hedge-fund-not-to-invest-50-million-with-outgoing-portfolio-manager