FORTUNE -- Earlier this week, hedge fund manager Marc Lasry declined President Obama's request to be nominated as the next U.S. ambassador to France. Today the NY Post reports that Lasry withdrew over ties to "an alleged Russian mob-run poker ring" that was busted last week by the FBI, although a source close to Lasry says that the paper got it wrong.
"Everyone knows that Mark plays poker in big private games, but he was never contacted by anyone involved in this investigation," the source says. "He already had reached his decision [to decline to nomination] before any of this stuff came up, based on divestitures and other issues related to Avenue Capital [the firm Lasry co-founded and runs]."
To be clear, I'm not sure who to believe. Even if my source is 100% correct about when and why Lasry made his decision -- and there's decent odds on that, given the NY Post's recent track record with cover stories -- the FBI investigation still may have forced his hand in a hypothetical scenario where business complications were manageable. What I do know, however, is that those business complications were very real.
There really isn't a road-map for how active fund managers transition into ambassadorships. The only one to have successfully done it was Ronald Spogli, co-founder of private equity firm Freeman Spogli & Co., who was President Bush's pick for Italy in 2005.
Spogli tells me that the process was lengthy and difficult, even though his Los Angeles-based firm only invested domestically. Here is what Spogli ultimately was required to do:
"They were incredibly thorough," says Spogli, who later repurchased his GP stake and now serves as Freeman Spogli's CEO. "We began having conversations and going over information in November 2004, and I wasn't nominated until the following June... For me there wasn't any question that I wanted to do it, since I'm a third-generation Italian-American and spent two years living it Italy. But for others without such close ties, I could see why the whole process would be seen as too much trouble."
And for Lasry, the situation may have been even more complicated than it was for Spogli. For example, take the issue of divesting general partner stakes. Spogli had a fairly large group of senior partners who could afford to buy him out -- including fellow co-founder Bradford Freeman. Lasry, on the other hand, has a much pricier position and co-founded the firm with his sister (Sonia Gardner). Even if Gardner could have afforded to buy Lasry out, it's unclear that White House or State Department officials would have been satisfied that the conflict of interest was resolved. Remember, Spogli's wife had to sell a tiny stock position in a massive public company. Here, Lasry's sister would be in charge of a portfolio with substantial European assets (including in France).
Lasry also was listed as a "key man" on several Avenue funds, meaning that investors would have to sign a waiver permitting him to leave (or else they could pull their money). Spogli was not the sole key man on any of his firm's funds, although such clauses could have been triggered had Bradford Freeman also decided to leave.
In short, Marc Lasry was going to have a very difficult path to Paris. Even if he had never anted up at the poker table.
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Hedge fund manager Lasry doesn't get ambassadorship.
FORTUNE -- Hedge fund manager Marc Lasry will not be the next U.S. Ambassador to France, following a bizarre process in which the hedge fund manager was told that he was indeed President Obama's pick.
Reuters was first to report the new development, and Fortune has obtained a short letter sent today by Lasry to investors in his firm, Avenue Capital.
From the letter:
"I am writing MOREDan Primack - Apr 23, 2013 4:13 PM ET
Avenue Capital names Rich Furst as chief investment officer.
FORTUNE -- President Obama soon will nominate hedge fund manager Marc Lasry to be the next U.S. Ambassador to France, and his firm is reaching out to investors about its future plans.
Fortune has obtained an email sent by Avenue Capital president Sonia Gardner, who co-founded Avenue with Lasry (her brother) back in 1995. The big news is that Rich Furst will take MOREDan Primack - Mar 18, 2013 11:19 AM ET
Top hedge fund manager expects the market to drop on fiscal cliff fears.
FORTUNE -- President Obama's favorite hedge fund manager is worried about the fiscal cliff.
Marc Lasry, who was one of the few vocal Wall Street supporters of the president during the election, has 25% of his portfolio in cash. That's nearly double what Lasry normally has going into the end of the year. The reason is the fiscal cliff. MOREStephen Gandel, senior editor - Dec 6, 2012 12:20 PM ET
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