Articles Posted in Hedge funds as whistleblowers

pension-300x200Sears pensioners have requested the Superior Court in Toronto to appoint an investigator to look into the nearly $300 Million shortfall found in the company’s pension fund. They particularly want the investigator to assess the $3 billion in payments made to Sears Canada shareholders.

The former employees are particularly targeting the U.S. hedge fund ESL Investments and have included its CEO Eddie Lampert in the complaints. This CEO has been the head of Sears since 2005 and has received the majority of the $3 billion pay out.

Lampert has said the the shareholder payments were not questionable and that most of the money came from the sale of the company’s valuable real estate holdings. Lampert has claimed that his hedge fund company had significant financial losses after the Sears bankruptcy. He said that the demise of Sears Canada is mostly attributed to a failed restructuring plan that he opposed in 2016. He also believes that the pension shortfall has been overestimated and that the money will eventually be recouped.

With several knew laws on the books encouraging whistleblowers to come forward with significant rewards for doing so in the financial industry, healthcare, military contracts and more, there is an interesting and sensitive issue which I expect will come to light soon. Because major whistleblower cases can and do affect the bottom line of publicly traded companies, astute hedge fund players can use the whistleblower case as a basis for shorting the stocks and the returns are significant. All that is needed is information that the case is filed or about to be filed and will have a material affect on the stock of a company. There are indications that this lightbulb has already been turned on as some hedge funds are funding whistleblower cases for a percentage of the rewards, which can be in the hundreds of millions. It is not a stretch to assume that the funder will know about the timing of the case. Insider knowledge? No clear answer. In other cases, the hedge funds themselves and their managers, armed with knowledge of fraud on the government are becoming the whistleblower relators themselves! More on this to come…