NEW YORK (Bloomberg) - The family trust of billionaire and former presidential candidate H Ross Perot was accused in a lawsuit of mismanaging a fund open to outsiders so that it went from $2.5 billion to "less than zero".

Southern Avenue Partners LP, which sued the Perot Family Trust and related entities, said Bermuda-based Parkcentral Global Hub Ltd. lost more than $3 billion while falsely claiming it was hedged against such losses. Southern Avenue wants to expand the suit to represent all the investors as a class.

"As a result of defendants' breach of fiduciary duty, the global fund imploded," Southern Avenue said in its complaint filed on April 27 in federal court in Dallas. "The global fund's net asset value went from over $2.5 billion to less than zero."

JPMorgan Chase & Co., a trading partner of Parkcentral Global, sued the fund in November, saying it's owed $753 million in collateral.

Perot, 78, founder of Electronic Data Systems Corp., ran for president in 1992 and 1996. He isn't named as a defendant in the complaint.

Eddie Reeves, a spokesman for the Perot family and its investment entities, did not have an immediate comment. He said in November that the fund was liquidating because it's "no longer viable."

The defendants misrepresented the risks of the fund to attract investors and collect more than $305 million in fees, Southern Avenue said in its complaint. They marketed the fund as "risk managed" rather than as a return fund, and exceeded its risk controls, Southern Avenue said.

"By late November 2008, the Global Fund was completely obliterated - its liabilities exceeded its assets - and plaintiff and the other members of the proposed class had lost 100 percent of their capital investment," according to the complaint.

Steven Blasnik, president of Parkcentral Capital Management LP and manager of the Perot family's money since 1992, and other defendants formed Parkcentral Global in 2002 with $56 million in cash, according to the complaint.

"Defendants marketed the Global fund as a once-in-a- lifetime opportunity to have access to the same money-management team (and proprietary trading techniques and strategies) used by the Perot family," Southern Avenue said.

The investors were told that Parkcentral Global engaged in a credit arbitrage/derivatives hedge.

When residential mortgages began to default in early 2007, Blasnik entered into "a trade, or a series of trades" that he said would bring a profit if the spread widened between interest rates of AAA-rated and lower-rated bonds backed by commercial mortgages, or CMBS, according to the complaint.

If the spread narrowed, the fund would have losses.

Mr. Blasnik took a long position in AAA-rated CMBS and a short position in lower-rated bonds. That made the fund short the credit spread between the highly rated bonds and an interest- swap rate, and long the credit spread between the lower-rated securities and the swap rate, according to the complaint.

By July 2007, though, Parkcentral Global had eliminated "a substantial portion" of the short position in the lower-rated bonds, leaving the long position with no hedge, Southern Avenue said. The fund told investors that the position was hedged, according to the complaint.

The investors were also told the long AAA position was leveraged three-to-one, when the actual leverage was more than 50-to-one, or more than $20 billion, according to the complaint. The un-hedged position destroyed the fund, Southern Avenue said.

"Blasnik's decision to take an un-hedged AAA CMBS position, hold it through 16 months of the credit debacle, conceal the true nature of the position and its losses from investors and misrepresent the risk and leverage of the position to investors was a gross breach of fiduciary duty," Southern Avenue said in the complaint.

Southern Avenue asked for compensatory and punitive damages.

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