Dirty Hedge-Fund War Exposes Ex-Google Boss Eric Schmidts Love Life

A bitter legal battle between a $50 billion hedge fund and one of its former star money managers has spilled over into the personal life of one of the funds part-owners, former Google boss Eric Schmidt.

In a plot that reads like a vengeful script from Showtimes hit show Billions, secretive hedge fund D.E. Shaws former wunderkind, Daniel Michalow, alleges the companys lawyers worked for months to dig up dirt on him following his controversial departure from one of the worlds biggest funds.

Michalowwho is suing the firm for defamation, seeking hundreds of millions of dollars in damages and an apologysays this included trawling through internal communications, interviewing current employees and contacting ex-employees searching for incriminating evidence.

As part of their efforts, D.E. Shaw lawyers also implied to other employees that an escort had stayed with Michalow when he represented the fund at the World Economic Forum in Davos in 2018, according to two people familiar with the matter.

But this female companion was in fact the girlfriend of Eric Schmidt, who owns 20 percent of the fund, and she is also a close friend of Michalows, according to the people familiar with the situation. The woman was staying with Michalow as Schmidt was at Davos with his wife of 39 years, Wendy.

The bizarre twist was revealed when D.E. Shaw lawyers forced Michalows attorneys to turn over photographs of the woman with Schmidt and text messages sent to and from Michalow while he was at Davos as part of a discovery request in the legal war.

The embarrassing text messages about Schmidts personal life, reviewed by The Daily Beast, include one from D.E. Shaw Managing Director Max Stone, who is on D.E. Shaws five-person executive committee, asking Michalow, how was the google lunch???? to which Michalow responded, it was awesome. I was at table with Eric Schmidt, King and Queen of Jordan, Kushner.

Awesome, Stone replied. Kind of surreal. Will give u a call later to give you download so far if youre around, Michalow texted back.

Stone responded: Any photos from lunch? And did Eric Schmidt have any of his 18-year-old girlfriends with him?

Records of a phone call between D.E. Shaw General Counsel Martin Lebwohl and a former senior executive at the firm demonstrate the dirt-digging into Michalow centered on his time at Davos and his female guest.

It was awesome. I was at table with Eric Schmidt, King and Queen of Jordan, Kushner.
Daniel Michalow, texting from Davos

Lebwohl, unaware that the female guest was the girlfriend of his paymaster, repeatedly asked about Davos, according to a person with knowledge of the matter.

Lebwohl was asking if Dan had showed up with anyone who reflected poorly on the firm, said a person familiar with the situation. I think what they were asking was, Was there a prostitute? They were trying to find out if there was some type of improper relationship in Davos to use against Dan.

A spokesperson for D.E. Shaw said The D.E. Shaw group is committed to an environment of mutual respect, in which everyone is free from harassment or discrimination of any kind.

Mr. Michalows account is inaccurate and his claims are meritless. We will defend ourselves in the arbitration.

But D.E. Shaw declined to answer several detailed questions from The Daily Beast or provide an explanation as to what was inaccurate about Michalows account or the accounts provided by current and former D.E. Shaw employees. A spokesperson for Schmidt declined to comment.

Schmidt, now with a fortune estimated at $11 billion, married Wendy in 1980. The pair are reported to have an open marriage. The Daily Mail described his private life as colourful and complex as the ever-changing Google doodle.

I think what they were asking was, Was there a prostitute? They were trying to find out if there was some type of improper relationship in Davos to use against Dan.

The British tabloid reported that he had carried out a three-year affair with former CNBC correspondent Kate Bohner from 2007-2010. He has also been romantically linked to pianist Chau-Giang Thi Nguyen, socialite Ulla Parker, fashion designer Shoshanna Gruss, and PR maven Marcy Simon.

In August, Page Six reported Schmidt had split from 32-year-old blond medical student Alexandra Duisberg, to whom he had given a 10-carat pink sapphire ring. Another article on Schmidt from the New York Post was headlined Ex-Google CEO Eric Schmidt may still be married but hes NYCs hottest bachelor.

D.E. Shawthe same firm where a young Jeff Bezos met his now-ex-wife, Mackenzie, and first worked on what would become Amazonhas been in an intense battle with Michalow since mid-2018, when the once rising star, who was making $40 million a year, departed the firm.

One female employee, who was contacted on behalf of a senior lawyer at the company, told The Daily Beast it was clear D.E. Shaw was looking for dirt on Michalow.

They were looking into an investigation into Dan and they asked if I was willing to participate, the woman said, recalling the conversation she had with a former colleague.

I said, you didnt give a shit when I was actually being sexually harassed at the firm, and I told them to go fuck themselves.

The drama started in February 2018 when Michalow made a joke to a female coworker about wanting to hire an assistant he could call sugar-tits. A male employee who was subsequentlytold about the remark complained to the head of HR, according to two current employees.

In mid-March, the Executive Committee announced to all staff that Michalow, 37, would serve a two-week suspension, along with sensitivity training.

D.E. Shaw has evolved into what I would describe as a bit of a cult and youre meant to worship the founders and if you betray any of them they go crazy on you.

But two days later, amidst the fallout, Michalow quit the firm, which told investors the then-35-year-old was leaving voluntarily and retiring.

Instead, Michalow soon announced his intention to continue his career in finance.

A little over a month later, the fund made a rare public statement that a review of Michalows conduct found gross violations of our standards and values referencing harassment and discrimination, and stories of the rift soon appeared in Bloomberg and Business Insider.

Michalow then published a bombshell letter on social media that he had sent founder David Shaw, in which he made allegations that senior executives had spoken openly about their use of drugs and painted a picture of a company culture that tolerated staff visits to strip clubs and lavish, alcohol-fueled parties. The letter also stated that a handful of senior managers had dated their junior reports. D.E. Shaw did not respond to questions about Michalows claims.

Michalow is said to be prone to sophomore behavior and can be abrasive, according to nine current and former D.E. Shaw colleagues who agreed to speak on the condition of anonymity, citing nondisclosure agreements they had signed and concern about retaliation from the firm. But all those interviewed agreed Michalows actions did not amount to gross violations of company policy.

People were taken aback at how aggressive management was, a current D.E. Shaw executive told The Daily Beast about the funds actions. I dont think Ive seen anything like that before. It seems to be a pretty dramatic overstatement to call it gross misconduct. Ive seen far, far worse examples of gross violations and those people survived.

Michalow joined DESCO, as the firm is known internally, after graduating from Harvard in 2004 and he quickly rose through the ranks owing to the extraordinary results he produced for the fund. In 2007, aged just 25, he founded and ran the firms Structured Credit business unit, which racked up around $500 million in profits. In 2011, he was made partnerone of the youngest ever.

D.E. Shaw has evolved into what I would describe as a bit of a cult and youre meant to worship the founders and if you betray any of them they go crazy on you. Dan is far more ethical than most D.E. Shaw employees, a former employee told The Daily Beast.

Theres a lot of craziness. The woman this comment was made to didnt even file a complaint.

In another twist, D.E. Shaw rolled out onerous changes to its employment agreements that included a non-compete provision timed to coincide with the exact date Michalow would be able to poach D.E. Shaw talent.

Tom Clare, one of Michalows lawyers, declined to comment to The Daily Beast, but previously told the Financial Times, Clearly, D.E. Shaw continues to be worried about competing with Mr. Michalow. When he voluntarily departed, the firm tried to extract a non-compete from Mr. Michalow. Then they defamed him in the press.

People were taken aback at how aggressive management was.

In September 2018, having already rejected a settlement offer of $15 million under conditions Michalow would not sue the firm and sign a non-compete agreement, he filed claim at FINRA (Financial Industry Regulatory Authority) against D.E. Shaw and four members of its management committee, including Stone.The matter, which will be heard in private arbitration, has now entangled Schmidt.

The former CEO of Google held leadership positions with the internet giant from 2001 until he abruptly resigned from the role of executive chairman of parent company Alphabet in 2017. He invested in D.E. Shaw in 2015.

David E. Shaw, the founder, said at the time, Ive always regarded Eric as a kindred spiritsomeone who shares our belief in the power of groundbreaking innovation, analytical rigor, and extraordinary, gifted employees.

Schmidt was equally ecstatic about his involvement. It feels like Silicon Valley in Manhattan, he said. People get consumed by hierarchy, but the evidence shows that flat structures and diverse teams operating collectively have better outcomes.

Michalow, through an attorney, declined to comment but pointed to D.E. Shaws second core principle take the high roadmaintaining the highest possible ethical and legal standards protects our reputation. More importantly, its simply the right thing to do.

Read more: https://www.thedailybeast.com/ex-google-boss-eric-schmidts-love-life-exposed-by-dirty-hedge-fund-war

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