Man Group, the hedge fund operator, has sent a senior manager at its US futures brokerage on administrative leave while it investigates allegations that he connived to hide losses in a collapsed hedge fund, it emerged at the weekend.
According to an a contempt of court motion, Thomas Gilmartin, a senior vice president in Man Financial, was a shareholder in Philadelphia Alternative Asset Management, a hedge fund that has collapsed with more than $170m in losses.
Clark Hodgson, the receiver appointed by a Pennsylvania district court to wind up PAAM, alleged in the motion filed last week that Paul Eustace, PAAM’s founder and principal manager, hid trading losses incurred in a main account in a secondary, secret account with Man Financial.
Mr Hodgson alleged that Man Financial had not produced records justifying why certain trades, transfers and back-dated transactions between accounts took place. As well as being a shareholder, Mr Gilmartin was PAAM’s main point of contact at Man Financial, according to the motion.
Man Group, which manages $44bn in assets, on Sunday rejected the accusation saying that it was “surprised and disappointed” by Mr Hodgson’s claims. In a statement Man said that it had provided the receiver with 4,200 pages of evidence and had offered to meetface-to-facebut had not heard back from him.
A Man Group spokesman said thatit was not unusual to place managers on administrative leave and to conduct internal investigations when serious allegations were made about the conduct of business.
Man Financial is the futures broking subsidiary of the hedge fund group. As such, it had no direct financial exposure to PAAM, the spokesman confirmed.
Futures are derivative contracts to buy and sell commodities or securities at a designated point in the future and are typically volatileinstruments.