Sculptor Capital Management Inc. founder Dan Och and other former executives sued the hedge fund firm over Chief Executive Officer Jimmy Levin’s “escalating compensation awards.”
The plaintiffs are seeking emails, text messages and other records related to Levin’s promotion to CEO and how the board determined his pay, which totaled $145.8 million last year even as Sculptor’s main fund trailed peers, according to a complaint filed Wednesday in Delaware Chancery Court. Levin, 39, has two separate contracts: one for the top job and the other for his role as chief investment officer.
Since taking the reins in April 2021, Levin has “devoted himself to entrenching his position at the company, shaping the board of directors, and wielding that resulting leverage to extract ever-escalating pay packages,” the former executives alleged. “Yet, while bringing massive returns to his own pocket, Mr. Levin has delivered less than mediocre performance to the limited partners in Sculptor’s investment funds, and the company’s stock price has collapsed.”
Shares of the New York-based firm have tumbled 57% since Levin took over as CEO in April 2021, compared with a gain of about 4% for the S&P 500. The firm’s main hedge fund lost 13% in the first half of 2022.
A spokesman for Sculptor didn’t immediately comment.
The former executives of the firm, previously known as Och-Ziff, said they want to probe whether the board broke its duty to shareholders by failing to consider other CEO candidates or conduct proper succession planning. They also noted that seven directors have left since January 2020, including five who resigned in the middle of their terms.
“Levin has capitalized on these departures to appoint directors who appear handpicked to serve his interests,” according to the lawsuit.
The former executives also said in the complaint that it’s “necessary to understand how the board has gotten to this point,” and that Levin’s tactics “have harmed, and are continuing to harm, Sculptor’s returns for its limited partners.”
Och, 61, and the other plaintiffs are described as Sculptor’s original and largest shareholders. They include Harold Kelly, Richard Lyon, James O’Connor and Zoltan Varga.
Rising Star
The suit escalates a years-long feud between two men who used to be close. Och was a mentor to Levin, who joined the firm as an analyst in 2006 and thrived during the 2008 financial crisis, becoming a star of Sculptor’s credit business. About a decade later, Och shocked Wall Street by appointing Levin, then just 33, as co-CIO and positioning him to take over as CEO. But Robert Shafir got the job instead.