Jailed Hedge-Fund Manager Sues Lawyer Over `Rushed' Home Sale

  • Michael Balboa says attorney's actions cost him $2.7 million
  • Ex-Millenium manager filed lawsuit in London against SBP Law

Convicted fraudster Michael Balboa, who sold his house to pay for U.S. defense attorneys, is suing a British lawyer whom he blames for the “rushed sale” of his property.

Balboa, a former hedge-fund manager at Millennium Global Investments Ltd., was found guilty of inflating the value of Nigerian bonds in 2013 and sentenced to four years in prison by a New York judge.

He’s now suing SBP Law, where his U.K. lawyer Gary Withey worked, alleging that the attorney failed to claim on Millennium’s executive insurance, which should have covered his legal bills, according to his documents from a lawsuit filed in London and released this week.

Balboa, who oversaw about $1 billion in losses at the Global Emerging Credit Fund Ltd., was “urgently and desperately in need of substantial funds to retain and pay American attorneys,” according to the documents. He sold his home in Oxshott, Surrey, for 3.8 million pounds ($5.5 million) when he says its true value was closer to 5.3 million pounds. He’s also claiming costs and lost gains -- a total of as much as 1.9 million pounds.

Millennium Global Investments, the London-based money manager founded by former Goldman Sachs Group Inc. executive Michael Huttman, liquidated the Global Emerging Credit Fund in October 2008 when lenders withdrew credit. Prosecutors said Balboa deceived investors and falsely inflated his fund’s performance. The sentencing judge said he should also pay more than $390 million in restitution, which is the sum prosecutors say investors lost because of his actions.

Withey is no longer at SBP Law, according to a secretary who answered the phone at the firm. SBP Law founder Michael Segen declined to comment when reached by phone and said that he wouldn’t pass on a request for comment to Withey. “We don’t talk to the press,” he said.

Withey didn’t immediately respond to an attempt to reach him via LinkedIn, or to a message passed on by a former business contact. According to the U.K. Law Society, he no longer practices as an attorney. Balboa’s lawyer Darren Hanison didn’t respond to an e-mail and telephone calls seeking comment.

In an unrelated U.K. lawsuit, the liquidators of Balboa’s fund are suing Citigroup Inc. over allegations the bank undervalued assets when it closed out trades at the height of the 2008 financial crisis. They say Citigroup terminated positions too quickly, which the bank denies.

Balboa says Withey was negligent because he never contacted a broker who dealt with Millennium’s insurance policy, indemnifying its executives against legal costs. Had Withey done so, “he would have discovered that the claimant was, at the relevant time, entitled to the benefit of a new insurance policy that had been effected for Millennium and its officers,” according to Balboa’s court documents.

Oxshott, the greater London site of Balboa’s multimillion-pound home, was once dubbed “the most expensive village in England” by the Daily Telegraph.

The case is: Michael Balboa v. SBP Law, High Court of Justice, Queen’s Bench Division, Commercial Court, CL-2016-000159

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