Carlyle Group was sued by liquidators of the buyout firm's defunct mortgage bond fund, saying executives lost $945 million in overly risky investments.
Liquidators for Carlyle Capital Corp. Ltd., a Guernsey, Channel Islands-based hedge fund that collapsed in March 2008, contend Carlyle directors turned a blind eye to questionable investments in residential mortgage-backed securities and failed to stop the loss of all the company's capital, according to a lawsuit filed Wednesday in Delaware Chancery Court.
“In the short space of eight months, the entirety of CCC's capital was spectacularly lost under the reckless and grossly negligent direction, supervision, management and advice of the defendants,” the liquidators said in the suit.
Lenders seized Carlyle Capital's assets after it failed to meet more than $400 million of margin calls on mortgage-backed collateral that had plunged in value. Carlyle Group, co-founded by David Rubenstein, wound up the fund seven months after its IPO.
Carlyle Group officials said they'd defend themselves in court over the fund liquidators' claims.
“We will vigorously contest all claims and are confident we will prevail,” Chris Ullman, a company spokesman, said in an e-mailed statement.