This black Texas principal was suspended because a parent sent this photo into the school board. John Iadarola and Jayar Jackson break it down on The Damage Report.
News coverage: NBC Channel 5
Which Stetson Clark is it?
1) Stetson Clark seems to match the description of the former school board member who filed the complaint.
His likes include “Support the Confederate Battle Flag”, lots of Trump stuff, FoxNews
2) Stetson Clark
Occupation: Operations analyst
Experience: After starting my career in Washington D.C., I joined Goldman Sachs and helped them build up their Dallas-Fort Worth office. My current employer, Highland Capital Management, is where I now oversee operations, accounting and auditing. My current duties at Highland mirror what I will bring to parents and taxpayers of GCISD — make sure we are getting the most from every dollar we invest. I have the ability to analyze complex financial data sets and turn that into an actionable plan for the future.
In October 2019, Highland Capital Management filed for Chapter 11 bankruptcy protection.
Hedge funds that play in the rough-and-tumble world of distressed debt are accustomed to using the court system to achieve their ends.
These battles often get ugly. For firms in this world — which seek to buy the equity and debt of companies that are in dire financial straits and then turn those companies around — the playbook often involves suing to recover assets, doing battle with other creditors, and taking control of the companies post-bankruptcy.
But even by the standards of exceptionally litigious investment firms, Highland Capital Management stands in a class by itself.
The Dallas-headquartered alternative-investment firm has been slugging it out in the courts since the financial crisis with investors, investment banks, and a pair of ex-employees who allege the firm fraudulently transferred assets to avoid paying out judgments that the courts ruled they are owed.
.. At its pre-crisis peak, in 2007, the firm managed some $40 billion and was considered a powerhouse hedge fund firm and a pioneer in so-called collateralized loan obligations, securing its status as one of the most high-profile — if controversial — credit investment firms in the business. But wrenching losses in its Crusader funds, and in another credit-focused hedge fund that had invested heavily in the toxic credit instruments that took down many of its peers, led the firm to suddenly announce in 2008 that it would suspend redemptions as it attempted to liquidate the assets — spawning the legal brawl that prompted the bankruptcy filing more than a decade later.
.. The one relic of its pre-crisis past that has remained, however, is Highland’s reputation as a scorched-earth litigator.
Almost no one contacted by Institutional Investor would speak on the record for this story, for fear of legal reprisal. Those fears are well founded: Thousands of pages of legal documents show that Highland’s co-founder and current chief executive, James Dondero, is not afraid to wage the legal equivalent of war — and doesn’t back down when the courts don’t rule in his favor.
Various court documents related to the lawsuits show that Highland has referred to investors as “idiots” in emails, blamed what it called one ex-employee’s “erratic” and “megalomaniacal” behavior on brain damage, and accused another ex-employee of having inappropriate sexual relationships with subordinates — the latter claim determined by an arbitration panel to be a “false pretext of ‘for cause’ termination” to get out of contractual obligations related to the value of his limited partnership.
.. But putting its numerous disputes behind it will be easier said than done. Many of the creditors have litigation claims against the firm, and they aren’t exactly ready to make nice. Those creditors include the two ex-employees alleging fraud, as well as investment bank UBS, which just won a $1 billion judgment against two now-defunct Highland entities over another crisis-era deal that also went south.
What’s more, some of the creditors aren’t satisfied with the new governance structure. And according to a copy of the proposal seen by II, one of them has suggested an entirely new management team to take control of Highland Capital Management.
The architect of the plan is none other than one of Dondero’s most ardent foes.
.. Highland’s reputation as a bare-knuckle brawler in court had already been cemented well before the crisis. That reputation is largely thanks to James Dondero.
Standing at a physically imposing 6’4″, Dondero is a big-game hunting enthusiast who owns a large gun collection — though people who know him say he also owns an even larger trove of books and can be socially awkward.
.. “Highland was viewed very negatively by the investor community,” a senior private equity executive told Institutional Investor for a 2007 profile of the firm. “They had an attitude of sue first and ask questions later.”
However unseemly that attitude may have been to Highland’s rivals, it worked as an investment strategy. The firm racked up impressive returns, with its Crusader funds gaining 40 percent in 2006, and attracted blue-chip investors along the way. These included the California Public Employees Retirement System and the Ontario Teachers’ Pension Plan.
.. But trouble hit in 2008 — as it did with so many hedge fund managers — when the financial crisis began, wreaking havoc on the funds and slashing returns. In October of that year, Highland told investors it would suspend redemptions from the Crusader funds — as well as from the Highland Credit Strategies fund, a separate hedge fund — and start liquidating their assets. But at the time, Highland maintained that it wished to wait to liquidate some of the assets to avoid dumping them at cut-rate prices in a fire sale.
.. When the case finally went to arbitration, the panel overseeing it unanimously issued three partial final awards and one final award against Highland, finding that the firm, its in-house lawyers, and Dondero had “engaged in willful misconduct, self-dealing, and secrecy, and made multiple misrepresentations to the Redeemer Committee and the Crusader Fund’s investors,” according to a November court filing in Delaware Bankruptcy Court by the Crusader creditors’ committee citing the arbitration findings. The panel also found that “Mr. Dondero was actively involved in the misconduct” and that Highland’s internal lawyers “were integral to implementing Highland’s deceitful schemes.”
.. But the firm eventually stabilized, and Daugherty ended up staying until fall 2011. By then the firm had created various new funds, including one that Daugherty was supposed to manage. But he, according to court documents, was not comfortable with the terms, autonomy, or lack of investor approval associated with the fund’s structure and wanted to see an agreement in writing.
Dondero refused, snapping at Daugherty, “You will trust or you will leave,” according to the court documents. Daugherty resigned on September 28 of that year.
Then things took a strange turn.
.. In October 2011, according to a lawsuit, Dondero invited Daugherty for a drink at Nicola’s, an upscale Italian restaurant in a suburb of Dallas. Over scotch, Dondero confided to Daugherty that he had amassed evidence that his wife, Becky, was cheating on him and that he planned to file for divorce. Dondero subsequently told Daugherty he planned to try to get his net worth down to avoid a hefty divorce settlement per the terms of his prenuptial agreement, according to the same court documents.
Not long after, Daugherty received a subpoena from Becky Dondero’s lawyers, seeking his testimony in the couple’s highly acrimonious divorce proceedings. In April 2012 a lawyer asked Daugherty questions about how much Highland was worth. Then he asked him point-blank if Dondero had ever told him about his plans to reduce his net worth so he could avoid paying his wife $5 million that she was owed. Daugherty testified that he had. Highland filed a lawsuit against Daugherty just two weeks later.
.. “Contentious” is an understatement. In its April 2012 complaint against Daugherty, filed in Dallas County Court, Highland accused him of improperly retaining the firm’s confidential information, breaching his fiduciary duty, and making defamatory statements about the firm; it also accused Daugherty of launching into “abusive tirades” against employees, publicly calling them “fucking idiots” and using misogynistic and homophobic slurs to berate them. Furthermore, Highland claimed that Daugherty had become “increasingly unmanageable, erratic, and insubordinate” — which it blamed on an admission Daugherty had allegedly made to the firm that years earlier he’d had two strokes that “left him with dead spots in his brain” and affected his mental competence and conduct.
.. According to trial transcripts, Daugherty testified that he paid Highland its fee award in December 2016, after the firm took aggressive measures to collect on the judgment. Daugherty testified that he and his wife had moved their vehicles out of the carport attached to their house because an internal Highland lawyer had threatened to confiscate all of Daugherty’s assets in front of his wife and kids.
“There was a vein of terror going through my family. . . . We were trying to protect our assets,” Daugherty testified at the trial.
When Dondero took the stand, he tried to portray Daugherty’s actions as simply those of a disgruntled employee.
“Ten or 20 percent of all employees, when they exit the firm, end up being some form of conflict. Eighty, 90 percent of the people move on with life for a variety of reasons, but then some people never get over it and they make it the rest of their life,” he said. “So I think that’s what Pat’s doing.”
In spite of all the rancor, Daugherty testified at the October 2019 trial that he sincerely believed when he paid the judgment in 2016 that Highland would pay its judgment to him.
“I just thought this was Dondero being Dondero, trying to extract his . . . pound of flesh and the satisfaction of seeing me squirm,” Daugherty testified, explaining why he wired the money for his judgment before Highland paid its judgment to him. “I thought they’d pay it.”