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Lipper Must Return Some Fees

The ruling follows his fund's acknowledgement of overvaluing assets.

Celebrity hedge fund manager Kenneth Lipper is being forced to give back some of the management fees he earned running his Lipper Convertible Bond Fund, which shut down last year amid allegations of potential wrongdoing.

A New York State judge overseeing a lawsuit brought by Lipper's wealthy investors ordered Lipper and his management team to give back some of the $44 million in bonuses they paid themselves over six years. The judge said Lipper isn't entitled to keep the extra fees after the fund admitted overvaluing its own assets by as much as 40%.

"The court holds that any portion of the incentive compensation fees that were improperly paid to Lipper based on the inflated valuations must be recredited to the limited partners," said Judge Karla Moskowitz, in an April 9 decision.

The judge also appointed a trustee to oversee the liquidation of the hedge fund. She said Lipper should have no role in that task, in light of the allegations of misconduct against him and the management team.

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Lipper's investors have brought a number of lawsuits seeking to recoup the $315 million that the hedge fund suddenly reported losing early last year. Federal prosecutors and securities regulators are also investigating the collapse of the Lipper fund, which at one time claimed to have $4 billion in assets.

A former New York City deputy mayor and a Hollywood producer, Lipper was one of the hedge fund world's better-known managers. Lipper's connections to the world of politics and film helped him lure a who's who of celebrity investors, including Julia Roberts, Matt Lauer, Sen. Ernst "Fritz" Hollings and New York

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publisher Mort Zuckerman.

Lipper has denied doing anything wrong. Even though he promised investors he would be a hands-on manager, he has argued that others in his management team were running the fund on a daily basis.