Monday, September 29, 2008
The United States District Court for the Southern District of Florida recently granted the SEC's motion for summary judgment, in part, against Michael Lauer, the architect of a $1.1 billion hedge fund fraud scheme. The Court found that Lauer's fraud as head of Lancer Management Group and Lancer Management Group II that acted as hedge fund advisers was "egregious, pervasive, premeditated and resulted in the loss of hundreds of millions of dollars in investors' funds." Te Court found Lauer materially overstated the hedge funds' valuations for the years 1999-2002, manipulated the prices of seven securities that were a material portion of the funds' portfolios from November 1999 through at least April 2003, failed to provide any basis for the exorbitant valuations of the shell corporations that saturated the funds' portfolios, lied to investors about the hedge funds actual holdings by providing them with fake portfolios; and falsely represented the hedge funds' holdings in newsletters.
The Court's order reserved ruling on the amount of disgorgement Lauer should pay until the Court conducts an evidentiary hearing, and gave the SEC sixty days to propose a civil money penalty amount that Lauer should pay.