Saturday, August 1, 2015

Huffington's Solace: Rubenstein & Conway's $30 Million in Vermillion

The Carlyle Group lost several investments in Spring 2008 prior to the Fall financial crisis.  Carlyle Capital Corporation's failure resulted in a high profile investor suing Carlyle and its marketing co-founder.  Forbes reported:

Michael Huffington, the wealthy former Republican congressman from California, is suing the Carlyle Group and its co-founder, David Rubenstein, over misrepresentations and deceptions Huffington claims they made regarding his $20 million investment loss in Carlyle Capital Corp., Carlyle’s failed publicly traded mortgage fund.
Seven years after Carlyle Capital Corporation declared bankruptcy, Carlyle associated hedge funds have suffered massive losses and redemptions.  WSJ reported:

Two of Carlyle’s co-founders, David Rubenstein and William Conway, invested their own money in the firm to the tune of $30 million, according to a person with knowledge of its operations, and kept it there even amid the losses and redemptions from other investors. The current value of their stakes is unknown. 
I hope it's $30 million each for Michael Huffington's peace of mind.

Vermillion had $2.2 billion under management at the time of the Carlyle acquisition; its assets in the legacy flagship, metals and freight funds have fallen to just over $400 million since then, though the new strategies in lending and index products have added about $1 billion. The firm’s total assets under management now stand at $1.4 billion.
Carlyle's commodity hedge fund wilted from $3.2 billion to $1.4 billion. That a 56% haircut. Huffington's $20 million Carlyle investment turned into a 100% loss.  Might he find justice or solace in Rubenstein and Conway taking a hit to their personal pocketbook? 

If not, justice may be served by the Royal Court of Guernsey in a case brought by Carlyle Capital Corporation's liquidators:

The Court has set the case schedule and trial is scheduled for the first available date after February 1, 2016.
Carlyle has a pattern of settling cases so it does not have to reveal its PEU secrets in any court.  We'll see how that and Carlyle's hedge fund investments hold up.