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Failed hedge fund haunts celebrities(Stallone sued for unjust enrichment)
Post Gazette ^ | 08/22/06 | Ianthe Jeanne Dugan

Posted on 08/23/2006 6:54:44 PM PDT by TigerLikesRooster

Failed hedge fund haunts celebrities

Tuesday, August 22, 2006

By Ianthe Jeanne Dugan, The Wall Street Journal

In the annals of hedge-fund collapses, Sylvester Stallone is among lucky investors who walked away unscathed -- or so it seemed.

In 1997, the actor invested $2.5 million in a private investment partnership called Lipper Convertibles. Four years later, with his statements showing the investment had swelled to about $3.8 million, he cashed out. Fellow actor John Cusack also walked away with big gains, as did former New York City Mayor Ed Koch and a trust fund for the children of investor Henry Kravis.

Now, they are all being sued to give money back.

What none realized, according to their lawyers, was that Lipper never made all that money. A portfolio manager had inflated profits by at least 40 percent, Lipper discovered in 2002. "We want all the money to be put back in the pool, so we can divvy it up equitably among all the partners," says Thomas Dubbs, an attorney representing the federal trustee overseeing Lipper.

(The hedge fund is unrelated to Lipper Inc., the mutual-fund data firm, which is part of Reuters Group PLC.)

In lawsuits filed in recent months in New York state court in Manhattan, the trustee, Richard Williamson, charges the investors who got out with "unjust enrichment." He wants them to return more than $100 million, including $1.3 million plus interest from Mr. Stallone alone.

Messrs. Stallone and Cusack, in court documents, say they were unaware of the fraud and didn't harm fellow investors. In an interview, Mr. Koch, who now works as an attorney at a private firm, says he intends to keep his profits, which amount to about $1 million, including interest. "It's just wrong," he says.

(Excerpt) Read more at post-gazette.com ...


TOPICS: Business/Economy; Extended News; Government; News/Current Events
KEYWORDS: collapse; hedgefund; suit; sylvestorstallone; unjustenrichment
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Hedge funds sure generate strange episodes.
1 posted on 08/23/2006 6:54:46 PM PDT by TigerLikesRooster
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To: maui_hawaii
It is not about China, but I thought it is interesting.:)
2 posted on 08/23/2006 6:55:34 PM PDT by TigerLikesRooster
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To: TigerLikesRooster

Maybe I'm naive but I think the honorable thing to do would be to return anything above the original investment.


3 posted on 08/23/2006 7:03:59 PM PDT by bkepley
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To: bkepley

If they had nothing to do with the fraud and merely cashed out why should they repay it? Its theirs. Thats what people do with stocks isnt it. Buy mow and sell out high?

I never heard anyone try to sue Hillary for her beef investments.


4 posted on 08/23/2006 7:45:53 PM PDT by sgtbono2002 (The fourth estate is a fifth column.)
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To: TigerLikesRooster
Adrian!
5 posted on 08/23/2006 7:46:22 PM PDT by Extremely Extreme Extremist (404 Page Error Found)
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To: sgtbono2002

If the money was not earned by the fund as the story says, then what they recieved was in fact money stolen from other investors. Since Sly, Koch etc. did not know this, they are not being charged with receiving stolen property.
As to the beast from the east, unless the confirmations for the transactions where she made that fortune were matched with those who lost,(the futures market is a zero sum game, if one wins, another looses) and those who lost bring no action, no harm no foul. IMO, that whole scam of hers was a way for some unknown person or entity to enrich the Clintoons. Possibly for later considerations.


6 posted on 08/23/2006 8:45:30 PM PDT by Roccus
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To: Extremely Extreme Extremist

lmao


7 posted on 08/23/2006 8:47:21 PM PDT by meanie monster
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To: sgtbono2002

Post #6 should read (as I understand it, the futures market is a zero sum game...)


8 posted on 08/23/2006 8:47:57 PM PDT by Roccus
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To: sgtbono2002

--Thats what people do with stocks isnt it.

Yeah but this was just a scam not a profit from buying and selling stocks.


9 posted on 08/24/2006 3:51:11 AM PDT by bkepley
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To: bkepley

If Stallone was a part of the scam he should go to jail, If he was just an invester and innocent of any wrongdoing he owes no one anything.


10 posted on 08/24/2006 5:21:01 AM PDT by sgtbono2002 (The fourth estate is a fifth column.)
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To: TigerLikesRooster
"unjust enrichment."

Sounds a lot like the liberal mantra of "social justice", does it not?

11 posted on 08/24/2006 5:24:31 AM PDT by verity (The MSM is comprised of useless eaters)
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To: verity
Re #11

I agree.

12 posted on 08/24/2006 5:43:45 AM PDT by TigerLikesRooster
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To: sgtbono2002

--If Stallone was a part of the scam he should go to jail, If he was just an invester and innocent of any wrongdoing he owes no one anything.--

Legally, maybe not. What I said was that the honorable thing to do would be to return the money, which is what I'd probably do unless I was really hurting since I've never cared that much about money anyway.


13 posted on 08/24/2006 3:05:06 PM PDT by bkepley
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To: verity

"unjust enrichment."
--Sounds a lot like the liberal mantra of "social justice", does it not?--

Not really.


14 posted on 08/24/2006 3:15:49 PM PDT by bkepley
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To: bkepley

Yes it does. :-)


15 posted on 08/24/2006 3:39:17 PM PDT by verity (The MSM is comprised of useless eaters)
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To: verity

Nope..liberals think unjust enrichment doesn't matter what you did to get the money..just having it is unjust.


16 posted on 08/24/2006 6:10:48 PM PDT by bkepley
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To: bkepley
People who can invest in Hedge Funds can well afford to lose their money...They protect us peons from investing by placing income qualifiers up front.

That said, I wouldn't give back the money...:)

sw

17 posted on 08/24/2006 6:18:18 PM PDT by spectre (Spectre's wife)
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To: spectre

--People who can invest in Hedge Funds can well afford to lose their money

I wouldn't be so sure about that. It wouldn't bother me too much if a wealthy guy got scammed. I know some older guys who risk quite a lot because if they don't collect a pretty good profit they're not gonna have much to live on in retirement anyway, or at least that's the way they look at it.


18 posted on 08/24/2006 6:32:58 PM PDT by bkepley
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To: sgtbono2002

You would think so but (I did not run the numbers about how much money they made and how fast the investment increased) if they made a lot of $ in a short period of time the arguement will be that that type of profit is highly unusual and they "should" have known that it was a ponzi scheme. Investors have been disgourged on this basis before.


19 posted on 08/24/2006 6:42:01 PM PDT by Oystir
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To: bkepley
Maybe I'm naive but I think the honorable thing to do would be to return anything above the original investment.

Not maybe. In an investment, you have the goal of increasing your capital. You have an eye open for new investment oportunities AND a poorly perfoming current one. When your investment goal is reached, or you have a better investment, you sell the one and either pocket the return or reinvest the capital and profits. In this particular investment, some were prudent, some were lucky, and who knows, maybe some were tipped off. If the latter, the courts will decide, if not, those are legitimate profits. Hanging on to a bad investment or not watching your investment is not prudent and could cost you your investment capital. Life is not the third grade.

20 posted on 08/24/2006 6:53:55 PM PDT by SandwicheGuy (*The butter acts as a lubricant and speeds up the CPU*)
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