A federal court judge ruled against the Seattle City Employees’ Retirement System’s request for a preliminary injunction to force executives of Epsilon Global Active Value Fund II to provide audited financial reports and other information about the system’s $25 million investment.
U.S. District Judge Richard A. Jones on May 11 denied the $1.6 billion system’s request for information about the hedge fund, managed by Steven G. Stevanovich, founder and president of Epsilon Investment Management.
Officials at the system claimed Epsilon II failed to provide an audited 2008 financial statement, including an independent valuation, according to an April 13 letter by Cecelia M. Carter, executive director, on the system’s website. She noted that Epsilon II suspended redemptions from the fund five days after the Seattle pension system sought to have its investment returned.
According to Ms. Carter’s letter and court filings, SCERS sought to compel Mr. Stevanovich and Epsilon II to provide the hedge fund’s 2008 annual report and audited financial statement or information from the fund’s auditor, PriceWaterhouseCoopers; to prevent Epsilon II “from taking any action harmful to SCERS or its $20 million investment”; and to stop Epsilon II from charging SCERS a management fee while the redemptions were prohibited.
Mr. Jones rejected the system’s arguments, noting that while “defendants have breached their agreement to provide an audited financial statement … no order of the court can cure that breach. Defendants cannot be compelled to produce documents that do not exist,” according to court documents.
The case was originally filed in March in Washington state court and later moved to U.S. District Court in Seattle.
Ms. Carter did not return a call by press time seeking reaction to the court ruling.