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

Humble in Hofstra...One Debate an Election Can Make

Sep 26 2016 | 10:20am ET

Tonight's U.S. Presidential debate, infamously coined the “Humbling in Hofstra...

Lifestyle

Vortic: Reimagining the Custom Wristwatch

Sep 27 2016 | 7:24pm ET

American watch manufacturer Vortic, which started out restoring antique pocket watch...

Guest Contributor

Malik: The Ever-Changing Middle Market and The Entering Class of 2016

Sep 2 2016 | 5:01pm ET

Deal sourcing and origination is only going to get more competitive given current...