Breeden, who has overseen scandal-plagued firms, seeks to profit from corporate cleanups

September 13, 2005
CNN/Money

NEW YORK (CNN/Money) - Richard Breeden, the former chairman of the Securities and Exchange Commission, is reportedly set to start a hedge fund that will focus on making money by pushing companies to improve their corporate governance practices.

The New York Times reported Tuesday that Breeden is seeking to raise between $500 million and $1 billion for the fund, which is to start Jan. 1. It is expected to hold large positions in the companies in which it invests, holding six to 12 investments at a time, according to marketing documents seen by the paper. The paper reports the fund will take an activist role pushing for corporate governance reforms.

Breeden has never headed an investment fund, but he has much experience pushing for reforms at the top of major companies. In addition to his time at the SEC, was appointed by a bankruptcy court to be monitor of WorldCom, now MCI (Research), the telecom that saw an accounting scandal cause the largest bankruptcy in history.

He was recently named corporate monitor for KPMG, the accounting firm that recently reached a $456 million settlement with federal prosecutors investigating the firm's role in questionable tax shelters. Breeden declined to comment on his investment plans Monday when contacted by the paper, though he did indicate that he would see through his role at KPMG.

The paper reports that Breeden Partners will get a 2 percent management fee and take 20 percent of profits, according to the marketing documents. That would mean that if the firm raises $500 million it would be paid at least $10 million, and significantly more if it able to make money on its investments.

While some hedge fund managers take a high-profile role in pushing companies to improve performances, Breeden's fund will "seek quiet reform where possible and become as actively involved as necessary to achieve desired transformations and prevent value-diminishing corporate actions," according to the marketing materials.

Labels: KPMG