March 24, 2010 / 9:32 PM / 9 years ago

INSIGHT-Bacon's fund has dealt with other legal issues

* Louis Bacon keeps mum on insider trading scandal

* Management style is getting questioned

* Bacon’s fund has had other legal run-ins

* Employees filed discrimination suits at Moore Capital

By Matthew Goldstein and Svea Herbst-Bayliss

NEW YORK/BOSTON, March 24 (Reuters) - A insider trading investigation in Britain is throwing a spotlight on the ultra-secretive management style of Louis Moore Bacon, the billionaire manager of a prominent U.S. hedge fund.

UK authorities arrested Julian Rifat, a London-based trader with Bacon’s $14 billion Moore Capital Management, as part of a broad and ongoing crackdown on insider trading. [ID:nLDE62N1WU]

And true to his style of avoiding the limelight, Bacon, a 53-year-old North Carolinian who came to Wall Street three decades ago, is not talking about the incident.

A spokesman for the New York-based firm, which maintains a big office in London, said Bacon has no plans to hold a call with investors to discuss the suspicious trading incident, which the firm said did not involve any of its money.

So far, industry analysts and investors said they don’t expect Moore clients to flee. But there are likely to be questions.

“I would imagine that anyone who is invested with Moore Capital right now has to do a re-review,” said Stewart Massey, whose firm Massey, Quick & Co invests over $1 billion. “I would want to come in and talk to understand this situation,” said Massey, who does not have money with Moore right now.

The incident involving Rifat is not the first time in recent years one of the industry’s largest and best performing hedge funds has run into controversy leading to legal disputes.

PROBABLE CAUSE

Twice in the past two years, female employees working in Moore Capital’s New York office sued in federal court, charging the firm and some of its executives with employment discrimination. Both lawsuits were settled out of court, according to court filings and people familiar with the litigation.

In one of the lawsuits, Juliette Pierre, a senior data analyst who began working for Moore Capital shortly after it opened for business in 1989, charged she was discriminated against because of her race and her age. Pierre, a 52-year-old African-American woman, sued after the New York State Division of Human Rights found “probable cause” that she was “treated more harshly than her younger, male Caucasian counterparts.”

Separately, Cynthia Rainis, another long-time female employee, sued in 2009, charging her bosses at Moore Capital discriminated against her because of her gender.

A Moore Capital spokesman declined to comment on the now resolved lawsuits.

The incident involving Rifat is not the first brush a London-based Moore Capital trader has had with British regulators.

In September 2008, Steven Harrison, a former top Moore Capital trader in London, paid a $78,000 fine to settle a “market abuse” investigation by British regulators. The Financial Services Authority found Harrison had received inside information before telling another trader to buy some corporate bonds.

Moore Capital was not implicated in the Harrison investigation nor has it been in the current investigation. Still, the image of lax oversight that is emerging at Moore Capital is at odds with its long-standing reputation as a well-run shop, industry analysts said.

With $14 billion in assets, Moore Capital ranks both as one of the $1.5 trillion hedge fund industry’s biggest players and one of its most consistently profitable.

The firm’s roughly $7 billion flagship Moore Global Investments Fund has returned an average of 21 percent a year, far more than the industry average.

“Moore Capital’s reputation in the industry really is an A plus,” Massey said.

PERSONAL FANCY

On Wall Street, Bacon, who owns homes around the world, including a 445-acre island on Long Island Sound, is known to value order and efficiency. He has a reputation for getting quickly out of poor performing positions and keeping mum about his strategies.

He got his start in the 1980s as a clerk on the New York Coffee, Cocoa and Sugar exchanges and later moved to Shearson Lehman Hutton as a futures broker where he got business from big names including George Soros, whose global-macro investing style he adopted for himself when he set up Moore Capital.

Bacon has long placed a heavy emphasis on selecting people to help him expand the firm and avoid debacles that have sunk some rival firms.

One of those people is Elaine Crocker, the fund’s president, who is responsible for overseeing compliance, finance and spotting talented traders. Another of Crocker’s many duties is keeping Bacon on an “even keel,” said people close to the fund.

Ironically, Crocker, when working at another trading firm, once refused to hire a much younger Bacon because he did not have enough experience. But years later, Bacon persuaded Crocker to join him at Moore Capital.

Bacon is also known for giving money to conservation groups, as well as making investments that suit his personal fancy.

He spent $11 million in 1993 on the largely uninhabited Robins Island off Long Island. He also purchased a ranch in Colorado for $175 million and has homes in Manhattan and London.

Along with some partners, Bacon pumped $30 million into GreeneStreet Films, an independent film company whose biggest hit was the movie “In the Bedroom,” which was nominated for five Oscars. (Reporting by Matthew Goldstein and Svea Herbst-Bayliss; Editing by Steve Orlofsky)

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