A Dallas hedge-fund mogul trying to sidestep a $5 million pre-nup pact payout to his ex-wife will find out as soon as this week if his claims of insolvency will work.
James Dondero, co-founder and president of the $18 billion asset manager Highland Capital Management, claimed in court that despite allegedly earning more than $36 million in 2010, several pending lawsuits against the firm have rendered him insolvent under the court’s accounting rules.
The bitter, two-year divorce battle — which has seen his one-time partner testify for the 33-year-old wife, Rebecca Dondero — went to trial Wednesday.
The battle has captured the attention of hedge-fund titans from coast to coast, not only because Dondero refused to settle short of a trial and risk embarrassing testimony in court — but because a casual conversation between him and Patrick Daugherty, the former partner, resulted in Dondero getting slammed at a hearing last year.
Daugherty testified for the wife that Dondero told him he planned to try and hide assets just to stiff Rebecca on the pre-nup.
Daugherty also claims in court papers that Dondero asked him to lie at an earlier hearing and tell the court Dondero was not hiding assets.
“Dondero [attempted] to help Daugherty remember how he should testify regarding his wife, suggesting that it was Daugherty’s idea that he pay his wife nothing and that Daugherty referred to Dondero’s wife as a whore,” court papers claim.
Daugherty hung up on Dondero when he made the request, court papers claim.
The couple, married six years and the parents of two girls, signed a pre-nup that called for Rebecca — known among the social set in Dallas as Becky — to receive up to $5 million.
Dondero’s claim at a hearing last spring that he was technically insolvent raised more than a few eyebrows.
Becky’s lawyer, Marilea Lewis, was quick to show the court a tax return that listed gross income for 2010 of north of $36 million.
James Dondero, 49, through a spokesperson, told The Post, “My divorce is a private matter and I do not wish to speak about it publicly.”
Dondero, with over 30 years of experience in the credit markets, has grown Highland Capital into one of the largest managers of corporate loan funds, or Collateralized Loan Obligations (CLOs).
After cutting his teeth at American Express, he founded HCM in 1993.
He married Becky in 2006 and quickly started a family.
It is unknown when things turned sour between the two but on Sept. 28, 2011, Dondero forced Daugherty out of Highland when he suspected his partner and Becky were having an affair, according to Daugherty’s testimony in another case.
Dondero later realized he was wrong, Daugherty said.
The money man later confided in Daugherty that he had 20,000 emails that proved Becky was having an affair with another, unidentified man, court papers show.
The Dondero emails covered every communication his wife had over the six-year marriage, Daugherty alleged in court papers.
“Dondero explained to Daugherty how evil his wife was and why he was determined to pay her nothing in the divorce,” the ex-partner said in court papers.
As expected, the former partners are not best friends.
“It is unfortunate that a disgruntled ex-employee who has admitted to having his own mental issues saw fit to use this private matter to disseminate lies and falsehoods about me and my family,” Dondero said in a statement Wednesday.
Dondero lives in a $9.96 million home in a posh Dallas neighborhood that he bought in September 2011, the month he filed for divorce. He also owns a vacation home in Vero Beach, Fla.
Highland in 2012 announced it earned $374 million, a four-fold return, when selling oil recycling company Safety-Kleen to Clean Harbors for $1.25 billion.
The firm donated $1 million this year to Reasoning Mind, a Texas-based nonprofit program committed to improving math education, and is presently sponsoring a Perot Museum exhibit on dinosaurs.
Neither Becky Dondero’s lawyer, Marilea Lewis, nor Daugherty returned calls for comment.