The founders of hedge fund-of-funds manager Pacific Alternative Asset Management must give hedge fund manager S. Donald Sussman a 40% stake in PAAMCO Founders, a group of founding members that own a roughly 75% voting interest and 65% economic interest in PAAMCO, a federal court judge ruled.
U.S. District Court Judge Richard J. Sullivan on Tuesday ruled that PAAMCO founders Jane Buchan, James Berens, William Knight and Judith Posnikoff agreed verbally in 2000 to give Mr. Sussman the 40% stake in exchange for providing seed money for PAAMCO.
Mr. Sullivan also ordered PAAMCO to pay Mr. Sussman $18.8 million in interest.
In a statement, PAAMCO called the startup money “a loan transaction“ that “was structured so that Mr. Sussman would not have any influence or control over PAAMCO's investment decisions on behalf of its clients.”
PAAMCO confirmed that Mr. Sussman would get 40% of PAAMCO Founders the firm but that he “will still be unable to influence or control PAAMCO's investment decisions,” the statement said.
Mr. Sussman could not be reached for comment.