(CN) - Investors say they lost $26 million because investment manager Robert Daugherty, head of Knowledge Investment Partners, "chose a path of deception, self-dealing and fraud," by loaning their money to his own companies.
In their complaint in Cuyahoga County Court, Cleveland, the Ramius funds say Daugherty, of Chagrin Falls, Ohio, promised that their money would be invested only in "publicly traded securities in the education sector."
But Daugherty used their money to make "impermissible loans" to several Knowledge Investment Partners affiliates and to pay off other investors who wanted out, according to the complaint.
Ramius and co-plaintiff Sequoia Alternative Investments, say that when they decided to get out of the funds, Daugherty admitted that KIP was having "liquidity problems" and failed to pay them back.
Ramius and Sequoia want their money back, a receiver appointed, and damages for securities fraud, breach of contract and breach of fiduciary duty.
They are represented by Alan Starkoff with Schottenstein Zox of Columbus, Ohio.