Lake Shore’s Baker Indicted in $300 Million Fraud

Date: Wednesday, June 17, 2009
Author: Andrew M. Harris, Bloomberg

Philip J. Baker, managing director of the collapsed Chicago hedge fund Lake Shore Asset Management Ltd., was indicted by a U.S. grand jury for allegedly operating a $300 million fraud.

The 27-count indictment was unsealed yesterday, Chicago U.S. Attorney Patrick J. Fitzgerald said in a statement today. While an arrest warrant has been issued for Baker, 44, his whereabouts are unknown, the prosecutor said.

The U.S. Commodity Futures Trading Commission last year accused Baker in a civil-enforcement lawsuit of having defrauded at least 700 investors by hiding trading losses. The CFTC won court orders barring Lake Shore from commodities trading.

“Baker misrepresented and caused to be misrepresented that Lake Shore had a long history of trading success,” when in reality it had lost about $38 million between 2002 and 2007, according to the indictment.

Baker’s business was part of a larger entity called the Lake Shore Group of Cos., which controlled commodity pools trading futures contracts offered on the Chicago Mercantile Exchange and other exchanges, according to the indictment. Baker falsely claimed the companies managed more than $1 billion in assets, the indictment said.

Neither Baker, nor an attorney claiming to represent him, appeared in court on his behalf during the CFTC case in Chicago.

Alexandre Schwab, a Geneva attorney identified in court documents as having represented Baker, didn’t immediately respond to an e-mail seeking comment. James A. McGurk, a lawyer who represented Lake Shore in the CFTC case, said by phone that he hadn’t seen the indictment and couldn’t comment on it.

20 Years

“It’s great that the U.S. Attorney’s office has gotten involved in this case,” Rosemary Hollinger, a CFTC lawyer who worked on the civil suit, said by phone.

If convicted, Baker faces as many as 20 years in prison on charges of wire fraud and obstruction of justice, and five years on allegations of commodities fraud and embezzlement of commodity pool funds, Fitzgerald said. The criminal case was assigned to U.S. District Judge John Darrah, according to court records.

The case is U.S. v. Baker, 09cr175, U.S. District Court, Northern District of Illinois (Chicago). The civil case is U.S. Commodity Futures Trading Commission v. Lake Shore Asset Management Ltd., 07cv3598.

To contact the reporter on this story: Andrew M. Harris at the federal court in Chicago: aharris16@bloomberg.net.