A federal judge in New York dismissed a $150 million lawsuit the San Diego County Employee Retirement Association brought against the collapsed hedge fund Amaranth Investors, the retirement association announced Thursday.
The judge said the county had signed documents indicating that it understood there was a risk of losing the money, and therefore dismissed the case.
Brian White, the CEO of the association, said in a statement that Amaranth's deception exceeded any such understood risk.
"Disclaimers weren’t a license for Amaranth to do whatever it wanted at the expense of its clients,” White said.
The association's board, which runs the pension fund for county government employees, met Thursday and voted to appeal the decision.
"Obviously, we all hoped for a better outcome, or we wouldn't be pursuing what we're pursuing," said Dan McAllister, the county treasurer-tax collector and one of two elected officials on the board.
In 2005, the association invested $175 million with Amaranth, a hedge fund specializing in natural gas trading. In 2006, the fund had grown to $6 billion before its sudden and spectacular collapse over a few days in September of that year.
The association managed to extract $70 million from the fund. But in 2007, the association filed the $150 million lawsuit to recover the remaining $105 million, plus $45 million it said it had earned before the fund collapsed.
Amaranth moved to dismiss the suit later that year.
While both parties waited for the judge to rule, Amaranth settled with the Federal Energy Regulation Commission for $7 million for violating anti-manipulation rules, the association said.
Nonetheless, the judge dismissed the pension fund's claims because officials had signed more than 16 pages of disclaimers that explained in detail that there could be losses.
The hedge fund collapse was the first of two prominent investment failures for the county's pension fund. Last year, the managers of WG Trading were arrested by the FBI for allegedly stealing from the fund. The association had $78 million at risk.
In March 2009, the association accepted the resignation of its chief investment adviser, David Deutsch.
Call staff writer Eric Wolff at 760-740-5412.
