Ross Capital Sued Over Client Losses During 1987 Crash
NEW YORK -- Two corporate clients are suing Ross Capital Corp. for allegedly causing investment losses as high as 60% during the October stock-market crash.</br></br>Although investment losses were widespread in the crash, few money managers have been sued by clients. Clients generally give portfolio managers wide discretion to decide how funds will be invested. Losses caused by market moves generally aren't grounds for legal action.</br></br>A suit filed Friday in New York federal court by New England Investment Corp., however, alleges that Ross Capital last October "abandoned" the strategy chosen for the client. New England Investment says in the suit that it had a 60% loss on a $10 million account during the crash. The suit also alleges that Ross Capital liquidated the account "with willful misfeasance, bad faith and/or gross negligence." New England Investment is a unit of Subaru New England Inc., in turn a unit of Subaru of America Inc., which sells imported cars.</br></br>On Dec. 30, a unit of Pacific Gas & Electric Corp. also filed suit in New York federal court against Ross Capital. That suit, which wasn't publicized, alleged that Pacific Gas Transmission was "injured in the amount of approximately $18 million" because of Ross's trading practices. That court case hasn't yet been resolved.</br></br>Ross Capital has been one of the leading money-management companies specializing in "dividend capture." That strategy involves owning high-yielding stocks for at least 46 days to collect their dividends, while hedging those holdings with stock options.