A New York-based financier poured millions of dollars from a failing hedge fund's assets into his other companies, including some Hooters restaurants, instead of honoring a promise to repay the Claude Worthington Benedum Foundation's investment in the fund, a lawyer for the Downtown organization argued Friday.
“This is a case where a person stole money, just stole money, and gave it to himself, gave it to his brother and to others,” attorney Jason Archinaco told U.S. District Judge Nora Barry Fischer.
A lawyer for William F. “Mickey” Harley countered that the foundation is a sophisticated investor that knew in 2008 that there were problems with the fund and waited too long to file its 2011 lawsuit. Harley and his company, FURSA Alternative Strategies LLC of Lynbrook, N.Y., did nothing wrong, attorney Patrick Cavanaugh said.
“Through no fault of Mickey Harley or FURSA, the fund imploded like a lot of funds imploded,” he said.
While agreeing that the entire market collapsed in 2007 and 2008, Fischer noted that Harley moved a lot of money around after 2008 that didn't go to fund investors and “all along he's paying himself $500,000 a year.”
Cavanaugh acknowledged that Harley is unable to explain many of the payments or even account for where all the money went.
“It's not the greatest bookkeeping,” he said.
“That's putting it mildly,” Fischer responded.
The arguments came during a hearing on each side's motion asking Fischer to decide the case in its favor instead of sending the matter to a jury trial.
The judge took the arguments under advisement and said she would put off ruling until the parties attend a March 5 session with a mediator.
The foundation has more than $370 million in assets. In 2005, it invested $2 million in the fund, which was then owned by Mellon Holdings LLC and managed by Harley.
Benedum was among the smaller investors in the fund, which Harley bought from Mellon in 2006 and put under FURSA's management.
The foundation tried to withdraw its investment in 2008. It claims that Harley promised in June 2008 to pay it $2.7 million but then sent it monthly emails through June 2009 updating the “status” of the account. Those stopped when he closed his office, disconnected the phone and quit responding to the foundation's queries.
In addition to his own salary, Harley paid his brother hundreds of thousands of dollars for no apparent purpose and paid at least $5.6 million to other investors who were his friends or business acquaintances, the foundation claims.
“A lot of money went to Harley and his brother,” Archinaco said. “Not a nickel to the Benedum.”
Brian Bowling is a staff writer for Trib Total Media. He can be reached at 412-325-4301 or bbowling@tribweb.com.
