A family feud within the operations of Richard Neu and shipowning company General Ore International Corp has laid bare allegations that Neu has crippled the finances of the bulker and gas carrier owner through reckless bets in the stock market.
According to a legal complaint filed by his daughter, Amy, Richard Neu allegedly suffered losses approaching $150m on risky option trading in the stock market, bringing General Ore to its knees during 2017, when the lawsuit was filed.
The legal drama includes the revelation of a $60m liquidity lifeline offered by Norwegian lender DNB, with a condition that former Teekay Corp chief executive Peter Evensen plays a key leadership role in the shipowner going forward.
1947: Hugo Neu Corp established.
1961: First freight contract between Neu and the Bergesen family of Norway.
1985: Hugo Neu dies aged 80.
1994: Hugo Neu Corp's assets divided between sons John Neu and Richard Neu. Richard selects 'shipping assets', while scrap business goes to John.
2001: General Ore buys out bulker fleet of German steelmaker ThyssenKrupp for about $365m.
March 2013: John Neu dies aged 74.
March 2017: DNB assesses General Ore liquidity challenges, sets conditions on $50m loan.
April 2017: Richard Neu fires daughter Amy Neu from job as head of family’s real-estate business.
31 May 2017: Richard Neu files claims against daughter Amy Neu in US District Court, New Jersey.
1 June 2017: Amy Neu files cross claim against father.
Amy Neu seeks to have her father removed as administrator for the family trusts behind General Ore and install her in his place.
Meanwhile, Richard Neu has fired his daughter from her leadership of the family’s real-estate interests and charged that she has mishandled funds, court filings indicate.
“This is a tragic case involving a father who is acting outrageously, recklessly and maliciously to the detriment of his daughter and grandchildren,” Amy Neu alleged in her complaint.
The elder Neu denies the allegations and “[has] asserted very serious cross-claims in response”, Evensen said in an email this week after TradeWinds sought comment from Richard Neu’s counsel.
Litigation has played out in the US District Court in New Jersey for almost a year without being publicly reported. The case is in the legal-discovery phase, with 100,000 documents circulated between the parties thus far, according to a recent update.
Richard Neu, believed to be in his 70s, is a reclusive Los Angeles-based businessman who has operated in the LPG and dry bulk sectors for decades through companies including General Ore, Neu Holdings Corp and Hamburg-based Neu Seeschiffahrt.
He is a son of the late Hugo Neu, a Jewish immigrant to the US who made a fortune in the scrap-metal business and forged shipping relationships with the likes of the Bergesen family of Norway that stretch back to the 1960s.
At the centre of Amy Neu’s claim is the allegation that her father drained millions of dollars out of General Ore’s coffers for his stock investments. That, together with a decline in its key VLOC and LPG sectors, brought the owner to a state of financial distress by early last year, she charges.
“Richard has gambled away approximately $150m on shockingly non-diverse stock portfolios primarily funded through purchases on margin even though the business purposes of all the companies owned by the trusts — essentially shipping and real-estate companies — are entirely unrelated to stock market investing,” Amy Neu claimed in a complaint filed by Allen Harris of New Jersey law firm Budd Larner.
“Because of his reckless gambling, General Ore International Corporation Ltd, the company which operates the Trusts’ shipping business, is functionally bankrupt.”
Trading on margin refers to the practice of stock investing with funds borrowed from one’s brokerage. Amy Neu states that the claimed losses took place in 2008 and then in 2015 to 2016.
The complaint focuses on Richard Neu’s purported attempts to keep General Ore running through a $50m borrowing under negotiation last year with DNB, which insisted on the principal injecting $10m of fresh equity.
In support of her complaint, Amy Neu attaches a document prepared by DNB last March that analyses General Ore’s liquidity challenges, and also indicates concessions required from the owner in order to borrow $50m.
“Trading [and] securities account to be closed and all funds to stay in GOIC [General Ore International Corporation]” is one of the conditions.
Another is a “change of control [and] management clause tying Peter Evensen and key employees in Hamburg to GOIC”.
The deal also would require a restructuring of an existing $805m syndicated loan agreement with 13 lenders, including Commerzbank, Unicredit, DNB, HSH Nordbank, Belfius, Kfw, Helaba Landesbanken Hessen, Natixis and Santander.
DNB volunteered to take the lead in negotiations.
Richard Neu’s responses to his daughter’s claims are not clear from the court file because he persuaded the court that his reply should be filed under seal to protect business secrets.
TradeWinds contacted Richard Neu’s attorney, Ronald Davison of New Jersey law firm Starr, Gern, Davison & Rubin, for an explanation, but the query was answered by Evensen.
“Since a number of the filings in the litigation have been submitted under seal, I am not and will not be in a position to address the court proceedings in any detail, although I think it appropriate to note that Mr Neu and his affiliated entities not only deny the allegations against them, but have asserted very serious cross claims in response,” Evensen wrote in an email.
