`Mentor' sues Citadel chief - Kenneth Griffin accused of fraud by ex-colleague

Discussion in 'Wall St. News' started by CPTrader, Jun 19, 2006.

  1. What do you folks think of this?


    `Mentor' sues Citadel chief
    Kenneth Griffin accused of fraud by ex-colleague

    By Becky Yerak
    Tribune staff reporter
    Published June 17, 2006

    Billionaire Chicago hedge fund manager Kenneth Griffin is being sued by a man claiming to be a former friend and mentor, alleging that the founder and chief executive of Citadel Investment Group LLC fraudulently ended their business relationship and stole trade secrets.

    The lawsuit, filed by Rush Simonson on June 8 in Cook County Circuit Court, accuses the 37-year-old Griffin of fraud, breach of a partnership agreement, breach of fiduciary duty and misappropriation of trade secrets, among other things.

    Simonson said in his lawsuit that he was a "friend and mentor" to Griffin beginning in the 1980s and that the two met in 1982 in Florida when Simonson was working at a Computerland in Boca Raton and Griffin came in to shop for a computer.

    Simonson further said that he ultimately left a "promising position" at a Palm Beach brokerage to round up potential investors and to provide technical and operational expertise to Griffin, who had the brains to invest the money they raised for their first hedge funds.

    "Griffin had an analytical mind and definite talents, but, as a practical matter, Griffin had few assets, limited financial knowledge and no significant financial contacts or operational expertise," the lawsuit said.

    Together, however, they hoped to build their funds "into powerhouses rivaling Wall Street's biggest investment houses," the lawsuit said.

    Simonson alleges that in 1988 Griffin "wanted to achieve financial success solely for himself" and sought a change in the ownership structure of their business, secretly plotting to run the business in Chicago without Simonson.

    Simonson claims that he was sitting in his dentist's office in November 2003 when he learned of Griffin's success in an article in Fortune magazine about Wall Street's "Power Elite." The article noted that Griffin had started a multibillion-dollar hedge fund, Citadel, out of his dorm room at Harvard and was discovered by Chicagoan Frank Meyer, who had bankrolled Griffin's first fund.

    The Fortune article did not mention Simonson, who found that the "dates associated with Meyer and Griffin's Chicago funds repeatedly overlapped with the times that Simonson had always understood Griffin to be working full-time with him," the lawsuit said.

    Citadel said the claims are "baseless" and "malicious."

    "Mr. Simonson has waited over 15 years to file this frivolous lawsuit," Citadel said in a statement. The statement acknowledges that Griffin and Simonson were co-general partners of two "small investment partnerships" formed in the late 1980s while Griffin was a student at Harvard.

    Griffin has hired Fred Bartlit of Bartlit Beck Herman as his lawyer. Citadel has retained Michael Foradas of Kirkland & Ellis.

    Now running a $12 billion fund that has consistently posted double-digit returns in its 15 years in business, Griffin "is obligated to share the fruits of his endeavors" with Simonson because he helped develop the techniques that made Citadel successful, the lawsuit said. Simonson is seeking unspecified compensatory and punitive damages.

    Griffin devised a "self-serving plan to fraudulently force the dissolution of their business relationship, misappropriate the strategy developed and honed by Simonson and Griffin for use in his own financial ventures, and divert critical business opportunities and funding sources that should have belonged to both of them," the lawsuit said.

    "Not only did Griffin abandon an ongoing business and legal relationship, unbeknownst to Simonson, Griffin competed directly against him," the lawsuit said.



    Copyright © 2006, Chicago Tribune
  2. mahras2


    If he had any sort of contact with the financial industry he shouldn't have had to rely on Fortune to tell him about Griffin's success.

    Just your average lawsuit faced by billionaires.