A comprehensive review of payments made to George Weiss and other executives at Weiss Multi-Strategy Advisers before the hedge fund’s bankruptcy earlier this year has been given the green light by a federal court judge following a request from Jefferies Financial Group, according to a report by Bloomberg.
Judge Martin Glenn granted the request by for a broader investigation than originally proposed by Weiss. Jefferies, a major creditor of Weiss, argued that payments to Weiss and other officers in the two years leading up to the bankruptcy could be subject to reversal under Chapter 11 provisions, which allow bankrupt companies to recover payments made to insiders.
Initially, the review was intended to focus on the approximately $30m in bonuses paid out to employees just before the hedge fund’s closure. These bonuses have been a point of contention in the ongoing litigation with Jefferies, which claims it is owed around $100m.
Weiss opposed the expanded review, arguing it was unnecessary and would deplete the limited funds available for the firm’s liquidation.
Judge Glenn ruled that the cost of the expanded review will be regulated by a budget, and any additional expenses should be kept to a minimum. The review will be conducted by a Justice Department unit that supervises bankruptcy cases.
Jefferies has previously raised concerns about Weiss’s expenditures, including allegations from Leucadia Asset Management, a Jefferies affiliate.
During a court hearing on Tuesday, Jefferies’ attorney Michael Jones stated that while his client has not conducted a full investigation, public reports suggest that the company’s airplane was used excessively and that additional executive bonuses were paid. If these claims are confirmed through the independent review, the payments could potentially be voided, Jones added.
