What Happened to the $19.5 Million?

Wednesday, June 26, 2013Last Update: 7:23 AM PT

What Happened to the $19.5 Million? By JACK BOUBOUSHIAN ShareThis   (CN) - A retired partner in Sullivan & Cromwell claims in court that an old friend and his investment firm helped her husband steal and conceal $19.5 million of community property through an unusual investment plan.      Hydee Feldstein sued Versa Capital Management, Contego AV Luxembourg, Allen-Vanguard Ltd., Gregory Segall, Paul Halpern, Raymond French, Dreyer Edmonds & Robbins, and Michael Dreyer in Los Angeles Superior Court.      Feldstein, a retired partner at Sullivan & Cromwell, claims that she and Gregory Segall, her former partner at Chrysalis Management Group, had a professional relationship that became a close personal friendship.      "The relationship was so close that Segall agreed to act and was named by plaintiff as a trustee under the testamentary trust established by her last will and testament for her son from 1995 through 2012," according to the complaint.      Segall was well aware that "Feldstein had become the primary breadwinner for her family and that, as a result of her busy work schedule, she left the management of all her investments and financial affairs to her husband and their accountant, [Michael] Dreyer," Feldstein says in the complaint.      She claims that "in or about May 2007, Segall asked Feldstein to invest in a new Versa fund, which he described as 'Fund II.' Segall offered to allow plaintiff to invest on a 'family and friends' basis. Segall represented that he would allow her to invest on the same terms as all other limited partners but that he would accept a commitment from her that would be less than the $1 million minimum required of limited partners generally."      Based on "reassurances from Segall and Halpern and the parties' decades-long relationship of trust and confidence, on or about February 15, 2008, plaintiff made a $250,000 capital commitment to the Fund for a fixed percentage interest as a limited partner," the complaint states.      In January 2013, Feldstein's husband, who handled their financial matters, filed for divorce, and Feldstein began to examine her finances, she says.      Feldstein claims that "defendants invested more than $19.5 million overseas in defendant Contego Luxembourg, a foreign corporation controlled by VCM. Of the $19.5 million invested, the Versa Company defendants allocated approximately $25,000 to plaintiff. Plaintiff does not know why the fund invested plaintiff's money in this unusual way.      "Plaintiff is informed and believes, and based thereon alleges, that the unusual foreign transaction reflected on plaintiff's K-1s is because plaintiff's husband, or an entity owned or controlled by him, utilized plaintiff's investment in the fund to conceal over $19.5 million of community property assets from plaintiff by moving them overseas to the Contego defendants, or one of their affiliated entities," the complaint states.      Feldstein adds that Segall and Versa Capital Management did not tell her that "she would incur potential tax liability in over 40 states in the U.S."      In addition, "the Versa defendants represented that a total of $650,000,000 in capital was committed to the fund. Plaintiff's $250,000 commitment should constitute an interest of approximately .039 percent in the partnership. Despite this, plaintiff's interest is variously listed from 0 percent to .131 percent and most recently as .0576 percent. Plaintiff seeks an accounting to understand what is going on with - and trace - her investment in the fund."      Feldstein seeks an accounting, $20 million damages and punitive damages for breach of fiduciary duty and professional negligence.      She is represented by Louis Miller with Miller Barondess.