US suit hits Govett shares
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Your support makes all the difference.Govett, the City fund manager, saw its shares fall a fifth at one point yesterday before closing 38p down at 311p, as a US investment fund said it was suing Govett for $20m for fraud, negligence and professional malpractice.
Directors of the $75m Govett American Endeavour Fund have begun legal action in California against Berkeley Govett International, a Jersey-based Govett subsidiary, and sacked Berkeley as fund manager.
The unexpected announcement yesterday morning by GAEF that it was taking action under US anti-racketeering legislation sent Govett's shares plunging. Dealers had to wait until 1.20 pm for a statement from Govett outlining the background to the affair andtheir rejection of GAEF's accusations. as "malicious and unfounded".
Govett said that GAEF had launched the action in the hope of escaping about $1m in management fees owed to Govett.
Michael Mayer, a director of Berkeley Govett, said: "We have $8.8bn under management while GAEF is $75m - it's a very small part of our operations. We don't know what they want. Obviously we're very disturbed by the lawsuit and we hope to mount a vigorous offensive against it - [the announcement] has clearly damaged us."
Mr Mayer said that since the launch of the fund in 1987 a previously good relationship with GAEF's main shareholder Firmindale had soured, after Firmindale started dealing directly with the companies in the GAEF portfolio. Mr Mayer added that Govett had told GAEF it was resigning as fund manager before Christmas because of this, and that GAEF was only launching an action now to disrupt Govett's current acquisition of Duff & Phelps Corporation, an American fund management group.
"This is all too common an occurrence in the US where people file these lawsuits in the middle of transactions," said Mr Mayer. "It's too easy to launch a law suit. But they can't be frivolous about this and get away with it."
The board of GAEF said the fund's largest shareholder, Jersey-registered Firmindale, had not been aware of all information regarding investment decisions.
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