Cayman Law Bars Suit Over $1B Fund, NY Appeals Court Says
From Law360
New York (May 28, 2013, 6:11 PM ET) — A New York appeals court on Tuesday affirmed the dismissal of a derivative suit accusing an offshore life settlement fund of mismanaging a portfolio once valued at $1.2 billion, saying the suit was barred under the law of the Cayman Islands.
A three judge panel of the First Department of the New York Supreme Court’s Appellate Division ruled that shareholder plaintiff Linda Shenwick can’t sue the directors of Himelsein Mandel Offshore Ltd. over alleged breaches of fiduciary duty tied to the funds’ investments in policies purchased…
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Investor Wants Fair Share Of $1.4B Portfolio For Fund
From Law360, New York (August 01, 2011, 4:11 PM ET)
A shareholder in a life settlement fund filed a derivative suit Friday in New York alleging the fund’s directors mismanaged life insurance policy investments, in a bid to secure the fund’s proper share of a $1.36 billion life settlement portfolio.
The directors of Himelsein Mandel Offshore Ltd. breached their fiduciary duty to the fund by investing in policies purchased by HM Ruby Fund LP without making sure HM Ruby had enough funds to pay the policies’ premiums, according to a complaint filed by Linda Shenwick in New York state court. Though HM Offshore is now essentially insolvent, its directors are not sufficiently acting in the fund’s interests in dividing the proceeds of the portfolio containing the policies, the suit says.
HM Offshore’s directors also did not investigate whether HM Ruby had overpaid for the policies, when HM Ruby had indeed overpaid, according to the complaint.
HM Ruby, Himelsein Mandel Advisors LLC, and HM Offshore directors Wayne Himelsein, Vijayabalan Murugesu and Evan Burtton are among the defendants named in the suit.
“As a result of their wrongful conduct and actions, the defendants named in this claim for relief have breached or aided and abetted a breach of their fiduciary duties of prudence and loyalty,” the complaint said.
HM Offshore, an open-ended mutual fund organized under Cayman Islands law, invested essentially all of its assets in loans that HM Ruby used in connection with its purchase of life insurance policies, according to the suit. HM Offshore and HM Ruby believed that by buying a high number of life insurance policies and paying the policies’ premiums, they would reap profits from the payouts they would receive on the insureds’ deaths, the complaint alleges.
Shenwick received regular statements from HM Offshore reporting consistent investment returns of about 18 percent a year, according to the complaint. But HM Advisors, who served as HM Offshore’s adviser, used valuation figures it had assigned itself, rather than the trading prices of similar securities, to determine the net asset value per share of HM Offshore, the suit says.
Fortress Credit Corp., with whom HM Ruby had entered into a credit facility and security agreement, told HM Ruby in November that it had defaulted on the credit facility because it did not have enough cash to pay a month’s worth of premiums, the suit claims. In January, Shenwick and other investors received a letter from HM Advisors saying it would no longer determine net asset value, according to the complaint.
On April 15, HM Offshore investors received another letter saying HM Ruby had reached a bridge loan facility and asset purchase agreement with an unnamed company. Shenwick is concerned that because some of HM Offshore’s managers invested in HM Ruby but not HM Offshore, HM Offshore will not receive its fair share of the sale to the company, according to the complaint.
Shenwick seeks to recover damages resulting from the defendants’ breach of fiduciary duty or aiding and abetting of breach of fiduciary duty and to ensure HM Offshore receives its proper share of the proceeds of the policies’ sale.
HM Ruby could not immediately be reached for comment Monday.
Shenwick is represented by Jeffrey S. Abraham, Lawrence D. Levit and Philip T. Taylor of Abraham Fruchter & Twersky LLP.
Counsel information for the defendants was not immediately available.
The case is Shenwick v. HM Ruby Fund LP et al., in the Supreme Court of the State of New York, County of New York. The case number was not immediately available.
–Editing by Eydie Cubarrubia.
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http://www.law360.com/articles/261557/investor-wants-fair-share-of-1-4b-portfolio-for-fund
