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Wednesday, November 13, 2019

Former Hedge Funds Manager, Others Face US Fraud Charges


Date: Monday, February 25, 2008
Author: Canadian Business.com

MIAMI (AP) - The Lancer Group hedge funds' founder and four other people were charged with defrauding investors out of more than $200 million by manipulating market prices and overvaluing securities, according to a federal indictment unsealed Wednesday.

The grand jury indictment charges former fund manager Michael Lauer and the others with conspiracy and six counts of wire fraud. The indictment said the fraud took place between 1999 and 2003, the year the Lancer Group's assets were frozen by the Securities and Exchange Commission.

At the time, the SEC contended that the fraud at three hedge funds managed by Lancer could top $1 billion. The Lancer Group was eventually placed into receivership, with investors filing millions of dollars in claims against the firm.

The indictment said the fraud involved manipulation of closing market prices of shell companies based in Boca Raton so that they reached certain fiscal targets. Lauer also allegedly overvalued securities held by the Lancer Group, luring more investors into the funds, and falsified key documents.

Lauer, who had offices in New York and Connecticut, was paid more than $40 million in fees from the hedge funds he was managing, according to the indictment.

Two attorneys who have represented Lauer in the past did not return telephone calls and e-mails seeking comment. Prosecutors said he was arrested in New York on Tuesday and was being held without bond.

Three others accused in the case Milton Barbarosh, Laurence Isaacson and Eric Hauser were freed on $500,000 bail each after appearing in court Tuesday in Miami.

The indictment identified Hauser as the Lancer Group's head trader, Isaacson as chief of some of the shell companies in which Lancer invested and Barbarosh as head of an appraisal firm that provided advice about investments to the hedge funds. Barbarosh also allegedly had financial interests in some of those entities.

"We are, of course, asserting Mr. Barbarosh's innocence," said his attorney, Michael Pasano. Attorneys for the others did not respond to telephone and e-mail messages.

The whereabouts of the fifth defendant Lancer Group manager Martin Garvey weren't immediately clear. Court documents in the SEC case listed a past address for Garvey in New Jersey.

The charges carry combined maximum penalties of 125 years in prison and fines of more than $1.7 million for each defendant.

The receiver appointed by the court in the SEC case to manage Lancer's assets and handle claims from investors reported in 2006 that about $633.6 million should be paid out.

Some Lancer assets were sold off, including an auction earlier this month for a Mercedes-Benz C11 race car that brought $2 million