BOSTON, April 30, 2012 /PRNewswire/ -- Claims for unfair and deceptive acts and practices leveled against the Carlyle Group, David Rubinstein, one of the Carlyle Group's founders, T.C. Group, LLC and Carlyle Investment Management LLC, by former Congressman Michael Huffington will be heard by a jury following a ruling by a Delaware Superior Court.
Huffington's claims arise out of his $20 million investment in a Carlyle-backed investment fund in 2007. The fund collapsed one-year after Mr. Huffington's investment was made, and after repeated assurances by Rubenstein and Carlyle that Huffington's investment would be placed in a fund that was in-line with Huffington's conservative and low-risk investment strategy.
Huffington's complaint alleges that he made the investment after Rubinstein told him that the "downside" for the investment was "very limited." Huffington learned much later after he invested, that the investment fund was highly leveraged and risky. Huffington alleges that after making the investment, Carlyle continued to assure him that his investment was safe and conservative, that he would be fully protected if he held the securities to maturity and that the securities "have NO credit risk." Before the Fund collapsed "the Fund had allegedly been leveraged over three thousand percent."
In a 43-page ruling, New Castle County Delaware Superior Court Judge Jan R. Jurden wrote, the law "only requires Huffington to come within 'shouting distance of some established concept of unfairness.' With that in mind '[a] practice may be deceptive if it reasonably could be found to have caused the plaintiff to act differently that he otherwise would have acted.' Consequently, the Court finds that a genuine issue of material fact exists as to whether Rubenstein and Stomber's alleged failure to inform Huffington of the Fund's intent to use leverage constitutes an unfair or deceptive practice."
Three days before the Fund collapsed Rubenstein was quoted in the Wall Street Journal as saying, "In hindsight the leverage was excessive." The Fund's performance plummeted after it was affected by a downgrade on residential mortgage-backed securities in 2008. Huffington ultimately lost his entire investment.
The Court further stated that "it is for the jury to decide whether Defendants engaged in an 'unfair or deceptive act or practice' by (allegedly) failing to tell [Huffington] about the use or extent of leverage" and the jury must also decide whether the overleveraging of the Fund constitutes an unfair or deceptive act or practice under the applicable law.
If Huffington is successful in his claims, the law allows him to seek up to three times his damages as well as his attorneys' fees.
Former Congressman Michael Huffington (CA-22) met with David Rubenstein on October 20, 2006 in Boston where Rubenstein suggested Huffington invest in the fund. On July 19, 2009, Huffington initially filed suit in Suffolk County Superior Court, Boston MA. This case will be decided under Massachusetts unfair and deceptive practices law, in the Delaware Court due to a provision in the investment vehicle that requires all disputes to be litigated in Delaware. The case is Huffington vs. TC Group, The Carlyle Group, Carlyle Capital Corporation, LTD., Carlyle Investment Management, LLC., and David M. Rubenstein. (C.A. No. N11C-01-030 JRJ CCLD)
Contact: Gregg Perry
SOURCE Michael Huffington