PAAMCO made to pay more than a pound of flesh

Wed Nov 3, 2010

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The founders of Pacific Alternative Asset Management Company are paying dearly for a lack of legal expertise in the early days


By Niki Natarajan

This is a cautionary tale of dotting the 'I's and crossing the 'T's. It would seem that the founders of Pacific Alternative Asset Management Company are paying dearly for a lack of legal expertise in the early days.

The bill so far is $74 million in interest and profits - and soon 40% of their holding company. And that is before any potential reputational damage is added to the mix following Judge Richard Sullivan's observation that their seed capital deal was structured to mislead investors.

In the coming days, the founders of PAAMCO need to decide whether or not to fight the judge's ruling that Franklin Holdings becomes a 40% equity holder. Although, even without this stake, with an ROI of 5,200% surely Paloma Partners' Donald Sussman's seed...

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