Both Deutsche Bank and JP Morgan Chase are preparing to sue Dermot Desmond's IIU Strategies over the sacking of its leading fund manager, according to a report in the Financial Times.
The two banks have investments in the fund formerly managed by David Morrison, who was sacked by Desmond following an incident with a female member of staff at an exclusive Barbados hotel.
Desmond, who also has stakes in London City Airport and Celtic football club, sacked Morrison after he delayed disclosing the incident to the IIU Board.
Several investors in Mr Morrison's fund immediately demanded the return of their stakes, but the IIU decided - on legal advice - that they had to enforce a 10% early withdrawal penalty.
Deutsche Bank and JP Morgan are challenging this decision on the basis that their contracts contain a 'key-man clause'. This allows investors to get out with no penalties in the event that the manager leaves the fund.
JP Morgan's case is complicated by the fact that both it and IIU have lost their copies of the final agreement. The bank is now using earlier versions of the contract to build its case.
