New York (HedgeCo.net) – On Thursday, a Federal Judge dismissed a $150 million lawsuit brought by the San Diego County Employees Retirement Association (SDCERA) against Amaranth Investors on the basis of the fact that, like all investors, the county had signed offering documents indicating there was a chance of losing its $175 million investment. New York federal court judge Deborah Batts ruled that the $7.2 billion dollar fund, which handles the benefits of more the 34,000 employees, should have been sophisticated enough to interpret the “clear, unambiguous language of the non-reliance provisions.” The ruling pointed specifically to language in Amaranth’s private placement memorandum (among 16 pages of legal disclaimers about the risk of investment) which said, “Investors must be prepared to lose all or substantially all of the investment in the Fund.”
The Connecticut-based hedge fund, which had assets totaling nearly $6 billion at its height, imploded in September 2006 because of a bad bet on natural gas trades. Although the association managed to wrest about $70 million of its initial investment from the fund before it went under, in 2007, it filed the $150 million lawsuit to recover the remaining $105 million, plus an additional $45 million it claimed to have earned before the fund collapsed. The SDCERA argued in its lawsuit that the disclaimers were standard and did not excuse the excessive risk taking and unreasonable conduct that led to Amaranth’s downfall.
It bears noting that while waiting for a ruling, Amaranth settled with the Federal Energy Regulation Commission for $7 million for violating anti-manipulation rules, the association said. “None of those disclaimers advised us that Amaranth was going to break the law,” Brian White, CEO of the association, said. “It was never in our contract that Amaranth could engage in behavior for which they would later be sanctioned by the Federal Energy Regulatory Commission.”
“Disclaimers weren’t a license for Amaranth to do whatever it wanted at the expense of its clients,” Brian White said in a news release. Disappointed by the judge’s ruling, the association’s board, which runs the association for county government employees, met Thursday and voted to appeal the decision.
By Colleen McCaffrey
For HedgeCo.net
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