Hennessee cleared in Bayou loss

Hennessee Group LLC has been cleared in a lawsuit filed by a client who lost money in the collapsed hedge fund Bayou Group LLC. South Cherry Street LLC, a Denver-based investor, along with other Hennessee Group clients, invested tens of millions of dollars into Bayou and then lost it after Bayou’s founders admitted that they overstated the fund’s performance, court documents said. South Cherry alleged that New York-based Hennessee Group and its managing principals Elizabeth Lee Hennessee and Charles Gradante, should have investigated Bayou when red flags came up, such as the fake biography of Bayou’s founder Samuel Israel III. By failing to do due diligence, Hennessee violated its fiduciary duty, South Cherry said in its suit. But U.S. District Court Judge Colleen McMahon of the Southern District of New York, dismissed the charges. “The failure to conduct due diligence is not the same thing as knowing of or closing one’s eyes to a known ‘danger,’ or participating in the fraud,” she wrote in her decision.