Ex-Pentwater Exec Jabs Founder Over $1.6 Million BonusBy and
Former employee says fund founder Matthew Halbower tricked him
Delaware judge to decide whether case over pay can proceed
Daniel Murphy may no longer be the head of Pentwater Capital Management LP’s fixed-income department, but he says fund founder Matthew Halbower still owes him at least $1.55 million in bonuses.
Murphy, ousted from Pentwater in 2015, persuaded a Delaware judge Wednesday to let him proceed with claims that Halbower, a Harvard-trained lawyer, tricked him into rejoining the investment fund and then cheated him out of the compensation he was promised.
“Murphy would not have rejoined Pentwater if he had known” Halbower’s promises weren’t legitimate, lawyers for the money manager said in court filings.
Pentwater makes bets on corporate transactions such as mergers, spinoffs and bankruptcies. The Evanston, Illinois-based firm reported regulatory assets of $7.6 billion in June 2016, down from about $10.7 billion at the end of 2014, according to the firm’s latest filing to the U.S. Securities and Exchange Commission.
Halbower, a former trader at Deephaven Capital Management, started Pentwater in 2007. The firm is one of four senior lenders for the bankrupt clothing-maker American Apparel LLC being sued by minority lender Standard General LP over an agreement to invest money in the failing retailer.
Halbower declined to comment on the pay dispute. Murphy didn’t respond to phone and e-mail messages seeking comment prior to a hearing underway Wednesday in Delaware Superior Court in Wilmington.
Lawyers for Pentwater and Halbower contend in court papers that the bonuses weren’t paid because Murphy didn’t live up to his end of the employment deal. They want Superior Court Judge William Carpenter to throw out the case.
“It is undisputed that he is no longer employed at Pentwater and that he failed to satisfy a contractual condition precedent for any bonus,” the company’s attorneys said in court filings.
Murphy originally filed the case in Delaware Chancery Court, but a judge there ordered it transferred to Superior Court on procedural grounds. John Reed, Halbower’s lawyer, unsuccessfully sought to persuade Carpenter on Wednesday to force Murphy to rely on the same claims he used in chancery. “I’m going to allow the amended complaint” to proceed, Carpenter concluded.
It’s not the first time that Murphy and Halbower have fought over pay.
Murphy had previously worked at the firm as a portfolio manager from 2008 to 2011. He resigned after complaining that Halbower was shortchanging him on bonuses, according to the lawsuit. Murphy said in the lawsuit that he felt the bonuses didn’t reflect that he’d “executed investments that earned substantial profits for Pentwater.”
Murphy claims in his complaint that Halbower approached him in 2013 about returning because he was upset with the performance of Pentwater’s fixed-income unit. The fund founder agreed to pay Murphy annual bonuses roughly equal to a 2.5 percent synthetic equity interest in the fund, which translates to more than $1.55 million in additional compensation, according to the complaint.
Murphy accused Halbower of altering a compensation plan to give the fund’s founder more control of the bonuses. That altered plan wasn’t shared with Murphy, according to the suit.
Murphy blames a disagreement with Halbower over the compensation package as the reason for his firing. Pentwater’s failure to pay the promised bonuses violated both Delaware and Illinois law, he claims.
The case is Daniel C. Murphy v. Pentwater Capital Management LP, N16C-12-433, Delaware Superior Court (Wilmington).