FILE PHOTO: Ray Dalio, Founder, Co-Chief Executive Officer and Co-Chief Investment Officer, Bridgewater Associates attends the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, January 18, 2017. REUTERS/Ruben Sprich
July 16, 2020
By Lawrence Delevingne
BOSTON (Reuters) – A senior Bridgewater Associates LP executive was only making a guess that former employees used trade secrets to compete against the world’s largest hedge fund firm, according to an arbitration ruling made public on Thursday that rejected the firm’s claim.
The executive, co-chief investment officer Greg Jensen, admitted he was guessing when he helped initiate the claims against Lawrence Minicone and Zachary Squire after seeing the investor pitch book of their new hedge fund firm, Tekmerion Capital Management LP, according to the ruling, which was issued on Jan. 24 but whose details were only made public on Thursday in New York County Supreme Court.
“I don’t have any other evidence. I don’t need any other evidence,” the arbitration panel in the case quoted Jensen as saying.
While the broad findings of the arbitration ruling were published on Monday, the panel’s entire judgment provides new details that shed light on the inner workings of $138 billion asset manager Bridgewater, led by billionaire Ray Dalio.
The Westport, Connecticut-based firm is known for its corporate culture of “radical transparency,” where much of its internal processes are recorded and debated openly among employees, from investment decisions to personnel performance.
Bridgewater created lists of people who were privy to the firm’s secrets “for purposes of the litigation,” according to the ruling. The lists included people who were not employed at Bridgewater during the relevant period and excluded others who had access, the ruling states.
Jensen and representatives for Bridgewater did not immediately respond to emails seeking comment.
An attorney for Minicone and Squire, Aaron Zeisler, said in an emailed statement to Reuters that “the fees and costs granted by the arbitration panel in its Final Award is the only matter that remains in dispute, and we look forward to pursuing their confirmation in court.”
Bridgewater has said in a court filing it “continues to believe that the arbitrators were mistaken and that it proved its trade secret and contract claims.”
Minicone and Squire, now in their mid-thirties, left Bridgewater in 2013. Following the expiration of their non-compete agreements, they co-founded New York-based Tekmerion in early 2017, which, like Bridgewater, makes market bets on global macroeconomic trends. That prompted Bridgewater to initiate trade secrets claims against the men later in 2017, resulting in arbitration.
The court ruling was released with the permission of a New York state court judge as part of a bid by Tekmerion’s founders to recover nearly $2 million in legal fees awarded to them by the arbitrators.
The arbitration ruling noted that news of Tekmerion’s start reached Bridgewater immediately, and had the attention of the firm’s top executives. Jensen forwarded an email about the launch to Dalio on Feb. 3, 2017, two days after Tekmerion’s start. Dalio responded to Jensen’s email at 7:25 p.m., 15 minutes after receiving it, although the contents were not disclosed.
The ruling also notes that Bridgewater’s trade secrets claims were undercut by its own fortress-like computer security. The firm has strict limits on which employees can access its investment code and processes; personnel enter and exit through designated doors; and they are required to put cell phones and personal computers in digital access-blocking lockers.
The ruling said Bridgewater brought the claim against Minicone and Squire in “bad faith.” It said Bridgewater “filed its claims in reckless disregard of its own internal records, and in order to support its allegations of access to trade secrets, manufactured false evidence.”
Bridgewater said in a filing earlier this week that the marketing document, a so-called pitch deck, “closely resembled” its own and, based on that, engaged in its own investigation, which concluded that the former employees had “misappropriated its trade secrets.”
More broadly, it said the panel’s “overarching holding” was that neither party proved their claims and therefore it should not have to pay their legal fees.
Tekmerion remains tiny by hedge fund standards, managing about $60 million today, according to a person familiar with the fund.
(Reporting by Lawrence Delevingne in Boston; Editing by Matthew Lewis)