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Frenkel & Co., Inc. Company
November 12, 2008
New York, NY - According to reports in the New York Post and The Globe and Mail, the plunging share price of Canadian fertilizer giant Potash Corp. of Saskatchewan Inc. is at the center of a wrongful dismissal lawsuit filed against New York hedge fund operator, Peconic Partners LLC, and its boss by its former chief compliance officer.
Joseph Sullivan alleged in a suit filed Monday in New York State Supreme Court that Peconic Partners LLC chief executive officer and majority owner William Harnisch engaged in the so-called "front-running" of Potash shares in late September and early October, costing the firm's clients as much as $24 Million.
Mr. Sullivan also alleges that he was dismissed without notice from the firm, in which he says he owns a 15% stake, shortly after he hired a lawyer to examine an amended ownership and operating agreement he says would have cost him millions of dollars in profit-sharing gains.
Harnisch says that Mr. Sullivan is just a "disgruntled employee" and that his allegations are "ridiculous."
Sullivan also alleges that he was fired by the Peconic CEO after he confronted Mr. Harnisch and demanded that the clients' Potash trades "be reversed or otherwise properly addressed." Mr. Harnisch refused to comply, and Mr. Sullivan was fired on Oct. 10 without notice "by a telephone call to his home, denied some $19-million in compensation owed him, and banished from the Peconic ... offices." Mr. Sullivan also alleges that Mr. Harnisch told other Peconic employees that he had been terminated because he had neglected his duties and engaged in improprieties by charging personal expenses to the firm.
An Employment Practices Liability policy, written on a stand-alone basis, or as part of an E&O/D&O policy would respond to this type of claim against a hedge fund. The policy would pay for defense costs as well as any judgment or settlement, up to the policy limit and subject to the policy deductible. It is not known whether Peconic has such a policy.
