Lancer Hedge Fund Fraud Trial Nears End

Apr 21 2011 | 10:09am ET

More than 1,000 miles from the Manhattan federal courthouse where yesterday lawyers made their closing statements in the Raj Rajaratnam trial, the trial of another former hedge fund manager moved towards its close.

Closing arguments were heard in the case against Lancer Group founder Michael Lauer and co-owner Martin Garvey. The two, who are on trial in Miami federal court, are accused of defrauding investors out of more than $200 million.

The two men—among five charged in the case—"were trying to pull the wool" over their clients eyes, manipulating the value of their hedge fund's holdings, causing hundreds of millions in losses. Prosecutors allege that Lancer bought large quantities of restricted shares in shell companies, including some owned by a co-conspirator. The hedge fund would then buy more shares on the open market to artificially drive up the stock price to a pre-planned level.

Lauer also created fake portfolios and got inflated appraisals of the companies held by Lancer, prosecutor Harold Schimkat said.

"While the investors are losing hundreds of millions of dollars, he was still pulling out $35 million in cash," Schimkat said.

Lauer's lawyer, public defender Michael Caruso, said that his client was actually a shrewd investor who "did not do anything illegal or commit any wrongdoing." Caruso noted that Lauer "could have taken everything and run" before his arrest, but didn't, planning to "clean things up and make his investors whole."

If convicted, the two men each face up to 25 years in prison.


In Depth

FINtech Focus: Fundbase Aims To Revolutionize Access To Hedge Funds

Jan 23 2015 | 11:03am ET

Global investment in financial technology—also known as fintech—is booming....

Lifestyle

Looking For A Hedge Fund Manager? Try Davos

Jan 28 2015 | 8:48am ET

Davos, Switzerland seems to have become the hedge fund capital of the world—at...

Guest Contributor

From Switzerland With Love: Some Hard Truths About Central Banks And Risk

Jan 23 2015 | 7:54am ET

In the wake of the Swiss National Bank uncoupling the country’s currency from...

 

Editor's Note