By CARRICK MOLLENKAMP

ATLANTA—A hedge-fund manager who traveled among this city's elite is seeking to return funds to clients amid accusations that he misled investors, according to a lawsuit against him and people familiar with the situation.

Robert L. Duncan, who posted years of solid results even during the turbulent fourth quarter of 2008, admitted to two of his investors that he had been faking his performance numbers since at least 2006, according to a complaint filed in court on Friday and people familiar with the situation.

Victims in the case, according to the complaint, include an Atlanta trust and two well-known Atlanta investment managers who had invested client money with Mr. Duncan and his fund, Seaside Partners Fund LP. Those clients sued Mr. Duncan on Friday in Fulton County Superior Court in Atlanta.

According to a person familiar with the case, Mr. Duncan gave clients auditing records purportedly provided by an accounting firm. This person contends that Mr. Duncan forged those statements.

Reached by phone Wednesday, Mr. Duncan said he was trying to work out how to return his clients' money. "I want everyone to have their money back," said Mr. Duncan, who wouldn't answer further questions.

The fund was believed to have about $20 million in assets and, while small by hedge-fund standards, the case is roiling Atlanta's blue-bloods. The case in recent days has been a topic of conversation at the old-line Capital City Club, where Mr. Duncan is a member and top golfer. At least $4.5 million is said to be at stake in the alleged fraud.

According to the complaint, Seaside was founded in 2003. Seaside materials show that Mr. Duncan was able to navigate through the recent downturn in the markets, even as other funds suffered. In October 2008, one month after the collapse of Lehman Brothers Holdings Inc., Mr. Duncan's fund posted a 1.4% return. That compares with an industry weighted index for the period that posted a negative return of 6.84%, according to Hedge Fund Research Inc.

The managers at Piedmont Family Office Fund LP and West Mountain Partners LP, two funds that had invested with Mr. Duncan, repeatedly sought to withdraw their money from Mr. Duncan's fund but were unsuccessful, said a person familiar with the situation.

On March 16, two Atlanta fund managers met with Mr. Duncan. In the meeting, Mr. Duncan allegedly came clean. According to court documents, he said he "had engaged in a massive fraud by depleting for personal use substantial funds that plaintiffs had invested with Seaside."

During the meeting, Mr. Duncan told one fund manager that he had used fake financial statements and also had provided fake accounting statements to his accounting firm, the complaint alleges. A spokesman for the accounting firm named as Seaside's auditor said his firm never audited the Seaside fund, doing only its tax returns and compiling its monthly valuation statements.

The complaint said the extent of the alleged fraud isn't fully known. Mr. Duncan's clients have received approval to freeze Mr. Duncan's assets.

"The fund managers did appropriate due diligence on Seaside" said Jeff Willis, an attorney at Rogers & Hardin and for the funds. Mr. Willis said his clients believed the Seaside fund was audited based on an offering document and annual reports purported to be audited.

People who knew Mr. Duncan and his fund said there had been no clue of the alleged fraud. Scott Wilkins, hired two years ago to help Mr. Duncan raise money and market his fund, said he learned of the alleged fraud only when Mr. Duncan confessed to him last Friday.

Mr. Wilkins described it as an emotional conversation in which Mr. Duncan admitted he had deceived his clients and family. Mr. Wilkins had no role in the fund management and wasn't named in the complaint. No money was ever raised by Mr. Wilkins.

"I hope he can resolve the matter," Mr. Wilkins said. "I was utterly dumbfounded."

According to a Seaside marketing book, Mr. Duncan worked as a money manager for 22 years at Bear Stearns Cos. and regional investment firm J.C. Bradford & Co. The materials say Mr. Duncan graduated from the University of Georgia with a bachelor of science degree with cum laude distinction.