Former Highland Capital exec Patrick Daugherty seems intent on damaging the firm rather than building it up, according to his ex-employer. (Bloomberg)
Highland Capital, the $20 billion Texas hedge-fund giant, fears a former top executive is plotting to steal clients, intensifying an already bitter legal battle.
Patrick Daugherty, who resigned as the firm’s head of private-equity and distressed investing in 2011, said last week he is planning to partner with another former Highland exec to launch his own investment firm.
His comments have hit a sore spot with Highland, which blasted Daugherty as a “megalomaniacal” manager who is “abusive” to employees in a lawsuit last year.
The suit filed in April accuses Daugherty of making defamatory comments about Highland to investors and breach of contract.
Lawyers for Highland, which was granted a temporary restraining order against Daugherty, are planning to bring his fundraising plans before a judge, The Post has learned.
Highland fears that Daugherty may try to poach clients or use confidential documents to get his business off the ground, a source said.
Highland officials declined to comment, while Daugherty didn’t reply to a request for an interview.
Daugherty, who was testifying in a separate case involving Highland last week, said he is teaming with former Highland exec Greg Stuecheli to start a new fund.
“I’m trying to start my own firm as we speak,” he said, according to a deposition obtained by The Post.
The legal salvo is the latest in an increasingly acrimonious back-and-forth.
After 15 years with the firm, Daugherty, who oversaw $8 billion, abruptly quit in September 2011. Highland sued him in April 2012 for making “disparaging, defamatory and false remarks” about Highland to investors and the media.
Daugherty shot back with his own allegations, including the improper “siphoning” of money between units, and claimed he was cheated on his compensation.
The fight has often gotten personal. Just days before Highland sued Daugherty, he took the stand in the divorce proceeding of his former pal and mentor, James Dondero, Highland’s co-founder and president.
He testified that Dondero, who was claiming insolvency under Texas law, had told Daugherty that he had tried to whittle down his net worth in an effort to pay his ex-wife “as little as possible.”
In its suit, Highland attributed Daugherty’s “extreme behavior” to two strokes he suffered that may have left his brain impaired.
Daugherty countersued for defamation, claiming the remarks hurt his ability to get a new job. But he recently dropped part of the defamation claim that would have required him to reveal his medical records.
Daugherty is also poised to take the stand in the upcoming trial between Highland and real-estate services company CBRE Group, where he is expected to say Highland has no case.
Highland sued CBRE for overvaluing Lake Las Vegas, a 3,592-acre residential and resort development in Nevada that Highland poured millions into before it filed for bankruptcy in 2008.