A lot of ink has been spilt during the past year regarding hedge fund manager Paul Touradji, founder of Touradji Capital Management (TCM), who was walloped in a court case brought against him in May 2019 by two ex-staffers who were not paid nearly $50 million in bonus compensation. But who exactly is Paul Touradji and how did he go from being one of the most promising hedge-fund investors on Wall Street to ruining his career and reputation?
Paul Touradji – the “Tiger cub”
The Iranian-born Touradji graduated from the McIntire School of Commerce at the University of Virginia in 1993 and got his start in the investment field in quantitative arbitrage with O’Connor Partners. In the mid 1990s he went on to work at Tiger Management where he managed the commodities team. It was there that he developed his fundamental approach to analysis and investment in commodities. Many of the managers at Tiger Management went on to great success in the hedge fund world and are known as “Tiger cubs”.
In 2000, Paul Touradji, along with fellow-Tiger cub, Robert Ellis, went on to found Catequil Asset Management, a once-successful commodities fund that was forced to close down in 2004 due to a legal spat between the founders. Ellis sued Touradji claiming that the latter misappropriated almost $1 million from the hedge fund by putting his parents and his girlfriend on the payroll. The claim said that Ellis was unaware of these transactions despite being a 50% owner of the fund.
At the root of the problem was a long-standing dispute between the two founders over what Ellis alleged was Touradji’s “abusive” management style, especially towards his staff. Ellis claimed that Touradji was so abusive that the NY State Department of Labor set aside an eligibility rule for an ex-staffer who quit, and ruled her eligible for unemployment benefits despite the fact that normally one has to be fired to collect benefits. The case was settled and they winded up the $1.5 billion in funds they managed.
Paul Touradji’s Fall From Glory
In 2005 Touradji founded TCM which continued his focus on commodities trading. He enjoyed a fair degree of success, with 6 years of growth, until 2011 when his fund started losing money. In 2011 his fund finished up just 2 percent, well below most market averages during a commodities bull market. An indication of tough times was when Gil Caffray, TCM’s CEO decided to leave the company to become chief investment officer at Touradji’s former employer, Tiger Management. Caffray, by all accounts, played a very valuable role at TCM, giving Touradji, who is known for loud outbursts and mood swings, the leeway to be involved in both the firm’s investments and operations.
Touradji has been the target of several lawsuits. He was sued by a former business partner who alleged that the hedge fund manager pushed him out of a venture to drill for oil in Texas and Louisiana.
But it was the high-profile departures of Gentry Beach and Robert Vollero, who joined TCM in 2005 that led to a ten-year court battle that would end in Paul Touradji’s disgrace. Beach and Vollero, portfolio managers who both helped build Touradji’s early success, claimed that they had oral contracts with the defendants, Touradji and TCM, which included a bonus of the fixed percentage of profits made.
After 10 years of litigation, nearly 60 depositions, 11 counterclaims and almost 900 docket entries, a jury decided, in a three-week trial during May 2019, to award $21.4 million to Beach and $24.3 million to Vollero. The payment will eventually come to almost $91 million due to a 9% yearly interest fee to be added to compensation earned from 2005 to 2008.
Paul Touradji’s Blatant Disregard for the Justice System
Paul Touradji claimed the plaintiffs had a contract of a base salary with a discretionary bonus and brought forth 2 motions to counter the jury’s verdict. The first motion was made orally the day of the jury’s decision, claiming that their verdict was unsupported by the evidence provided. This motion was summarily rejected by the court. This would normally have been the end of the affair, but Touradji decided to try his luck once again in overturning a duly brought verdict and brought forth a second motion on June 10th to set aside the verdict and have a new trial.
New York State Supreme Court Judge Borrok was clearly perplexed and exasperated at Touradji’s lack of respect for the jury’s unanimous decision. Borrock writes that the jury had duly considered both side’s claims and returned a verdict that was supported by the evidence.
To make matters even worse, Touradji has shown his complete disregard for the judicial system by transferring over hundreds of millions of dollars from his business to himself and to his sister in order to avoid having to pay Vollero and Beach. Touradji received a total of $314.8 million in transfers between 2012 and 2018 and his sister received $13 million between 2012 and 2017. In order to receive the $46 million the court ordered Touradji pay, the plaintiffs are now asking the court to order that the transfers be ruled fraudulent. Judge Andrea Masley has issued a temporary restraining order that blocks Touradji from transferring his assets until a hearing held in the near future. Touradji Capital is today a lightweight outfit, managing a mere fraction of what it used to. It represents only nine customers in Boca Raton, Florida. Paul Touradji, the “Tiger cub” is a now a kitty, discredited and humbled by the justice system and has finally got what many would say was coming to him.