UPDATE: Why is this Third Point Trader being Sued for Civil RICO?

UPDATE 9-5-12: Hedge Fund publication FinAlternatives is writing today about news of the Perry divorce/Civil RICO suit which was reported here first over a month ago. They mention accusations about Jeff Perry leaking news to the New York Post during their coverage of the balance sheet problems with Fairfax Financial. Perry’s ex-wife Elizabeth is off-base in this claim. I interviewed the NYP reporter involved who said Perry was not his main source on that story. In fact before Elizabeth filed her claim I told her attorney this. The suit reads like a shakedown because she thinks her husband has hidden money from her as they headed to divorce. Mr. Perry’s attorney told a local paper the lawsuit is “baseless” and The Jouranl News writes Jeff Perry’s lawyer noted the suit came just a few days after his client won custody of the couple’s children in July. The Jouranal News reporter, Erik Shilling, basically rewrote Mrs. Perry’s lawsuit without doing any investigation to learn about the dirty tactics we’ve seen between some hedge funds and Fairfax Financial. Shilling also refused to follow basic journalism ethics and credit me for reporting this news first.

Original Story
A trader for Dan Loeb’s Third Point hedge fund was sued for civil RICO yesterday in New York Federal Court. This time it’s not a disgruntled CEO coming after trader Jeffrey Perry, who was involved in the controversial short sell trade against Fairfield Financial; it’s his wife of 20 years. Elizabeth Perry who sued Jeffery in 2011 for divorce claims her husband has worked for years to hide some of the $40 million in assets they made during their marriage and has allegedly lied on the net worth statement he filed in Westchester County, NY state court.

Mrs. Perry says she know this because she found investments in other hedge funds Jeffery had made and has some Cayman Island bank accounts he didn’t disclose but surprise surprise he won’t give the details about their worth in discovery during their divorce case. Elizabeth says investments in funds like Arden Institutional Advisors and Black Bear Fund II are worth over $1 million. So she rallied another famous hedge fund wife, Patricia Cohen’s attorney Howard Foster, to file a civil RICO case. Jeffrey Perry had also worked for Patricia’s ex Stevie Cohen and another famed hedgie Jim Chanos. Chicago-based Attorney Foster has had some success in Civil RICO cases and is still fighting Mrs. Ex-Stevie Cohen case in New York appellate court. The Cohen civil RICO case could get a decision soon and overturn a dismissal by a New York judge. Attorney Foster showed documents and detailed evidence about Stevie Cohen hiding over a million dollar investment from Patricia which made the case pretty strong. But the Perry suit he filed yesterday reads like a conspiracy theory not laden in a lot of detailed fact. The Perry’s divorce is still ongoing with custody battles being heard in New York State court this week.

Elizabeth Perry’s civil RICO claim could award her triple damages if her attorney can prove there was a conspiracy to hide assets planed by Jeffery while he was working at Third Point as far back as 2005. Attorney Foster attempts to lay out Jeffery’s role in ‘watching’ other people share information and analysis about Fairfax to reporters in an attempt to drive down the price of the stock. This is a case that made headlines for years except Foster leaves out the fact the a New Jersey judge dismissed the claims Fairfax brought against Third Point, Danny Loeb, Jeffery Perry and others.

Elizabeth’s suit makes a big assumption that Jeffery also created a false analysis about Fairfax and shared it with a New York Post reporter who then used Jeffery’s info to write an investigative story about the company being investigated by the Feds. I looked into this claim and learned from the reporter that wasn’t the sourcing for the story which makes me question does Elizabeth actually know any new information about Jeffery that could amount to a racketeering claim. If she does I’d expect members of the SEC to be knocking on her door but if not I don’t see why Jeffery’s actions as a trader doing research on a company his fund thinks is full of fraud ties into whether or not he’s hiding investments during a divorce.

Lying about your wealth so your soon-to-be-ex gets less and signing documents that confirm this is illegal in this country and discovery in big money wall street divorce cases can be really expensive. But using a federal court system with a civil RICO claim to get a judge to move discovery along or intimidate her husband seems extreme. If a federal judge finds merit to her civil RICO strategy then we’ve got a story to watch.


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