Paulson Accuses Ex-Partner of Embezzling Millions in RICO Suit

John Paulson, the hedge fund billionaire who made a fortune betting against the subprime mortgage market, has filed a RICO suit against his former business partner Fahad Ghaffar, alleging that he swindled millions of dollars from their joint ventures in Puerto Rico. Paulson’s counterclaim comes after Ghaffar sued him for $50 million in September, accusing him of fraud and breach of contract.

According to Paulson’s suit, filed in the US District Court for the District of Puerto Rico, Ghaffar committed 21 counts of misconduct, including fraud, breach of fiduciary duty, embezzlement, extortion, tax fraud, insurance fraud, and setting up a sham charitable foundation. Paulson claims that Ghaffar spent $3.4 million of company money on personal expenses such as private jets, nightclubs, luxury shopping, and fine dining. Paulson also alleges that Ghaffar diverted business to himself and his family members, inflated the cost of goods and services, and planted false evidence to implicate Paulson in wrongdoing. Paulson is seeking $189.6 million in damages from Ghaffar and his co-conspirators.

Paulson Accuses Ex-Partner of Embezzling Millions in RICO Suit
Paulson Accuses Ex-Partner of Embezzling Millions in RICO Suit

The Puerto Rico Projects

Paulson and Ghaffar worked closely together on several Puerto Rico properties, including La Concha Hotel, the Vanderbilt Hotel, the Condado Beach Club, the St. Regis Hotel and the Bahia Beach Resort. Paulson invested in these properties through his PRV Holdings, a company that he formed in 2015 to take advantage of Puerto Rico’s tax incentives for wealthy individuals. Ghaffar was hired as the CEO of PRV Holdings and was responsible for managing the operations and finances of the hotels.

However, Paulson claims that Ghaffar abused his position and used PRV Holdings as his personal piggy bank. He accuses Ghaffar of using 22 American Express credit cards tied to his personal accounts and reimbursing himself for unauthorized expenses. Some of these expenses include:

  • $20,000 at the Omnia nightclub in Las Vegas
  • $8,000 at the Marquee nightclub in New York
  • $45,000 at Chanel
  • $102,000 at Louis Vuitton in St. Barths
  • $400,000 on private jets through a shell company
  • $2.4 million on domestic workers such as babysitters, maids, handymen, and housekeepers

Paulson also claims that Ghaffar set up a fake charity called the Fahad & Glenda Foundation, which he used to funnel money from PRV Holdings and evade taxes. He says that Ghaffar threatened to expose Paulson’s alleged tax evasion if he did not pay him $50 million.

The Luxury Car Dealership Dispute

The dispute between Paulson and Ghaffar escalated over a luxury car dealership that they invested in together. According to Ghaffar’s suit, Paulson asked him to invest $17 million in a convertible note that would give him 50% ownership in the dealership and a real estate company, both of which were owned by a Paulson family trust. Ghaffar says that he agreed to invest his money and work as the CEO of the dealership without pay until he received the note2.

However, Ghaffar claims that he never received the note and was removed from his role in August 2023. He accuses Paulson of misleading him about the value and profitability of the dealership and the real estate company. He also alleges that Paulson used his family trust to shield billions of dollars in assets from his wife Jenica Paulson, who is suing him for divorce in New York.

Paulson denies Ghaffar’s allegations and says that he never promised him any ownership stake in the dealership or the real estate company. He says that Ghaffar’s investment was a loan that was repaid with interest. He also says that Ghaffar failed to perform his duties as the CEO of the dealership and caused significant losses to the business.

The Implications for Paulson

The legal battle between Paulson and Ghaffar could have serious implications for Paulson’s reputation and fortune. Paulson is one of the most successful hedge fund managers in history, having earned $15 billion for himself and his investors by betting against the housing market before the 2008 financial crisis. He is also known for his philanthropic activities, having donated hundreds of millions of dollars to various causes, such as medical research, education, and conservation.

However, Paulson’s performance and popularity have declined in recent years, as his funds have suffered losses and his clients have withdrawn their money. He is also facing a bitter divorce from his wife of 21 years, who is seeking a large share of his estimated $4.7 billion net worth. The lawsuits from Ghaffar could further tarnish his image and expose him to potential criminal charges and tax penalties.

Leave a Reply

Your email address will not be published. Required fields are marked *