Hedge witch hunt


Date: Monday, August 23, 2010
Author: Kaja Whihouse, New York Post

Fund presses to get magazine to reveal source

One of New York's wealthiest hedge-fund gurus is on a witch hunt to track down the person who leaked his fund's latest quarterly investor letter.

The hunt, started this week with court papers being filed, also includes the guru's attempt for a court order to get the trade magazine that is ready to publish the data contained in the letter to hand over e-mails and the name of its source.

While more executives in the secretive hedge-fund business are stepping up their attempts to keep investors from leaking information, the move this week by Paul Singer, founder of $17 billion New York hedge fund Elliott Management Corp., to actually seek a court order to force a media outlet to divulge its sources, is extremely rare.

A Manhattan state court judge set Sept. 9 for a hearing on the matter.

Meanwhile, the magazine, AR: Absolute Return+Alpha, is believed to be ready to publish the information, about the fund's investment positions as laid out in its June 30 investment letter, as soon as next week.

Elliott, a 33-year-old Fifth Avenue firm, which focuses on distressed debt, said in court papers that publication of the data will "give other market participants a competitive advantage."

But First Amendment lawyers scoffed at the notion that Elliott has legal grounds to force AR to uphold the hedge fund's confidentiality agreements.

"It just seems to me to be colossal gall," said Chuck Tobin, a media lawyer with Holland & Knight in Washington, who said New York state has tough laws protecting journalists from revealing their sources.

Lawyers for Singer, a top fundraiser for Rudy Giuliani's 2008 bid for president, stopped short of demanding AR not publish the information -- a route legal experts say would most likely have fallen flat due to the First Amendment protections.

Instead, Elliott filed a petition with the court demanding AR disclose the source of the information, saying it wants to locate, pursue and punish the leaker.

Editor Michelle Celarier declined to comment on the legal proceedings.

Even at a time when hedge funds are growing increasingly protective of their investment information, especially amid sagging returns and large withdrawals, Elliott's move is unusual.

Hedge fund bigwigs John Paulson and Ray Dalio, of Bridgewater Associates, are among those who have employed technology in recent years to stop people from forwarding or printing their letters to clients.

Elliott requires investors to click a button agreeing to try to protect the confidentiality of the information they're about to view. It also watermarks its letters so it can track who may have passed them around.

kwhitehouse@nypost.com