Marble Ridge Conduct in Neiman’s Bankruptcy Questioned

The hedge fund interfered in the reorganization process, the U.S. trustee in the case said.

Marble Ridge, the hedge fund that took aim at Neiman Marcus’ handling of the Mytheresa web site, has set off alarms over its own conduct during the bankrupt retailer’s reorganization process.

Marble Ridge managing partner and principal Dan Kamensky had tried to block a potential competing bidder — the financial firm Jefferies Financial Group Inc. — from bidding in one of the transactions in the retailer’s ongoing reorganization efforts, according to the findings of an inquiry this month by the U. S. trustee in the case.

In a statement filed late Wednesday in Texas bankruptcy court, the trustee, whose role involves overseeing the integrity of bankruptcy proceedings, detailed Kamensky’s interactions in July with an unnamed Jefferies employee, citing transcripts of exchanges that took place between Kamensky and the employee over Bloomberg terminal chats.

“Tell Geller to stand DOWN,” Kamensky is quoted as instructing the Jefferies employee, making a reference to Eric Geller, a senior analyst at Jefferies who had informed Neiman’s creditors committee in the case of Jefferies’ plan to bid in the transaction. Kamensky is also cited as telling the employee, “DO NOT SEND IN A BID.”

The report also cites a phone conversation between Kamensky and the Jefferies employee, which the employee had recorded, that shows Kamensky urge the employee not to tell the committee that he had asked them to pull the bid, claiming that he had only meant that the firm shouldn’t make a bid unless it had a serious offer. When the employee disagreed with this characterization,

Kamensky was recorded as saying,

“If you’re going to continue to tell them what you just told me, I’m going to jail, OK? Because they’re going to say that I abused my position as a fiduciary, which I probably did, right? Maybe I should go to jail. But I’m asking you not to put me in jail.”

Marble Ridge was itself a member of the creditors committee, but left that role as of August. The trustee wrote that Kamensky appeared to acknowledge the severity of his purported actions.

“Mr. Kamensky admitted that contacting and trying to influence a potential rival bidder for property of the bankruptcy estate was wholly inappropriate and a grave mistake,” the trustee wrote in the report.

The transaction in question itself had involved a major settlement in the case to resolve the long-running dispute over the Mytheresa transactions. As part of that settlement, revealed ahead of a hearing in the case at the end of July,

Neiman Marcus Group Inc. had agreed to put 140 million shares of series B preferred stock in Mytheresa into the retailer’s bankruptcy estates, meant to go toward the recovery pool for general unsecured claims.

Geller had informed the creditors’ committee that Jefferies had wanted to bid on those 140 million shares, which was what led to Kamensky’s alleged efforts to manipulate the process, according to the trustee’s report.

Neiman Marcus Group Inc. is the parent company controlled by its leveraged buyout sponsors Ares Management Corp. and Canada Pension Plan Investment Board, which purchased the retailer for $ 6 billion in 2013. The Neiman Marcus Group parent and Mytheresa are not part of the ongoing bankruptcy proceedings.

The trustee’s report noted also that the Kamensky’s efforts to deter the competing bid ultimately didn’t work. The new findings are not expected to affect the retailer’s planned reorganization, and the confirmation hearing on Sept. 4, is expected to proceed as scheduled. The court may also schedule a hearing on the trustee’s findings about Kamensky’s actions.

Representatives for Marble Ridge and Ares declined to comment.