A US district court judge has granted a motion brought by the Securities and Exchange Commission for summary judgment against the main perpetrator of the multi-million-dollar Lancer hedge
A US district court judge has granted a motion brought by the Securities and Exchange Commission for summary judgment against the main perpetrator of the multi-million-dollar Lancer hedge fund fraud.
Michael Lauer of Greenwich, Connecticut, was found liable for violating the anti-fraud provisions of the federal securities laws. In a 67-page order, Kenneth A. Marra, US district judge for the Southern District of Florida, found that Lauer’s fraud as head of Connecticut-based companies Lancer Management Group and Lancer Management Group II, which managed investors’ money and acted as hedge fund advisers, was ‘egregious, pervasive, premeditated and resulted in the loss of hundreds of millions of dollars in investors’ funds’.
Linda Chatman Thomsen, director of the SEC’s division of enforcement, says: ‘This case highlights the SEC’s ongoing efforts to combat hedge fund fraud and our dedicated work on behalf of investors to ensure that hedge fund managers are held accountable for any unlawful conduct.’
David Nelson, director of the regulator’s Miami regional office, adds: ‘We are particularly gratified at this decision, which resulted from several years of hard work to protect investors, starting when we successfully halted the fraud while it was still ongoing.’
Lauer raised more than USD1.1bn from investors and his fraudulent actions caused losses to investors of around USD500m. The SEC initially won emergency temporary restraining orders and asset freezes against Lauer and his companies, which were placed under the control of a court-appointed receiver after the SEC filed its enforcement action in 2003.
During the protracted litigation, the SEC says, it successfully stopped Lauer from diverting or hiding millions of dollars of assets from the court’s asset freeze.
The summary judgment order found that Lauer materially overstated the funds’ valuations for the years 1999 to 2002, manipulated the prices of seven securities that were a substantial portion of the funds’ portfolios between November 1999 and at least April 2003, failed to provide any basis to substantiate or explain the exorbitant valuations of the shell corporations that dominated the funds’ portfolios, hid or lied to investors about the funds’ actual holdings by providing them with fake portfolio statements, and falsely represented the funds’ holdings in newsletters.
The order reserved ruling on the SEC’s claim for disgorgement with prejudgment interest against Lauer, and on the amount of a financial penalty he must pay. The SEC is seeking a financial penalty and disgorgement of more than USD50m Lauer gained from his fraudulent scheme.
