Fund Manager Fights for $13.7 Million Bonus in Clawback Suit

  • London-based Marathon in pay dispute with its co-founder
  • Hosking quit and encouraged colleagues to join new business

The co-founder of Marathon Asset Management LLP had to return a 10.4 million pound ($13.7 million) pay award after he quit the London-based asset manager and encouraged colleagues to join him. Now, his lawyers told a judge, he wants it back again.

In the months before leaving the firm in 2012, Jeremy Hosking talked with four members of his team about starting a new business, according to his documents from a London court hearing. Marathon says that was a breach of his fiduciary duty.

Hosking “accepted there were serious breaches and apologized,” his lawyer Pushpinder Saini told the court Thursday. Hosking has paid about 1.3 million pounds to Marathon in damages, but Saini described the request that his client return the share of profit that he’d already received as an “oddity.”

Rules about partnership members forfeiting remuneration after a breach of duty exist to “penalize and deter dishonest conduct of the kind Mr. Hosking has engaged in,” Marathon said in its court documents.

Marathon won the 10.4 million pound forfeiture, half of Hosking’s share of its 2012 profits, in a private arbitration ruling last year. He repaid the money in November 2015, the firm’s lawyers said, but is now challenging the arbitrator’s decision at a London court, allowing the dispute to be reported for the first time.

Remuneration Question

Judge Guy Newey will decide whether profit shares given to partnership members are treated as remuneration, which can be clawed back after wrongdoing, or an entitlement to earnings, which Hosking’s lawyers say cannot. The case will be closely watched by members of investment firms, hedge funds and private equity firms around London, which are often structured as partnerships.

It has “considerable ramifications in the general market,” Hosking’s lawyers said in their court documents.

London’s courts have hosted some high-profile bonus disputes in recent years. Deutsche Bank AG and UBS Group AG took their case about the tax status of banker bonuses all the way to the Supreme Court last year, while a group of Dresdner Kleinwort employees won about 50 million euros ($55 million) from Commerzbank AG in a landmark 2013 claim.

Opportunity

Hosking told employees working under him that there was a “future business opportunity” where they “could potentially work with him, if they left Marathon,” according to the firm’s court documents.

Marathon, which manages about $50 billion in equities, has no connection to Marathon Asset Management, the $12.8 billion New York firm specializing in distressed debt.

“The arbitration found Mr. Hosking deliberately committed a series of serious breaches of his fiduciary and contractual duties while still at Marathon,” the London firm said in a statement.

Hosking, who now works at Hosking Partners LLP, declined to comment. He founded Marathon with Neil Ostrer in 1986 and was head of its global division.

The employees who quit with Hosking would probably have left anyway because he was a “business within a business” and they were loyal to him, Saini said.

The case is: Jeremy Hosking v. Marathon Asset Management LLP, High Court of Justice Chancery Division, HC-2015-004901

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