NEW YORK A judge has ruled on a legal spat between two former Soros Fund Management colleagues who launched their own firm in 2005, coming down on the side of a credit analyst who accused his former partner of withholding millions of dollars owed to him.
William Seibold and Richard Brennan founded Camulos Capital in 2005 after working together at George Soros' eponymous hedge fund, Soros Fund Management, for about three years. The pair were part of a $1 billion team that specialized in distressed debt investments.
In 2007, Seibold left Camulos to launch his own now-defunct hedge fund, the Noroton Event Driven Opportunity Master Fund. At the time of his departure, Seibold made a redemption request for his initial $3.2 million investment in Camulos, in addition to roughly $1.45 million the investment had gained in value.
Camulos refused to give back the money after it discovered Seibold had taken confidential documents from the investment firm, including investor lists and marketing materials.
Seibold sued his former employer for his funds at the end of 2009. Camulos counter-sued in 2010, alleging breach of fiduciary duty and breach of contract among other claims.
Delaware Chancery Court Judge Leo Strine found that, although Seibold did breach confidentiality agreements, he did so "in limited ways" and his conduct "did not harm" Camulos Capital. He said Camulos improperly withheld about $4.6 million from Seibold and ordered the funds returned with interest.
"Just as its lovely harbors are crowded with their expensive, less than fully utilized vessels, so are southern Connecticut's towns filled with wealthy money managers," Judge Strine began his often sardonic 79-page decision. "This case is about the falling out between two of them."
The Judge was unconvinced by Camulos claims against Seibold, including that he had become ineffective toward the end of his time at the firm and had fallen "asleep at his desk." Camulos paid Seibold a $2.8 million bonus for his work in 2006 - "an odd thing to do if Seibold's work had been substandard," Strine wrote.
Judge Strine found in favor of Seibold on all of his claims, except for "his demand for an excessively high rate of prejudgment interest" on his investments.
Seibold and Camulos will have to pay their own legal fees.
"The emotions of the parties have led to a suit the expense of which seems to be disproportionate to what is financially at stake," Judge Strine wrote.
"Both parties, to be frank, have behaved less than admirably."
The case is William Seibold v. Camulos Partners LP, Camulos Partners GP, Camulos Capital LP, Camulos Capital GP, Richard P. Brennan and Richard D. Holahan, Court of Chancery, State of Delaware, No. 5176-CS
(Editing by Andre Grenon)