After Five Years On The Lam, Hedge Fund Fraudster Found In Austria

Jul 9 2007 | 11:55am ET

After five years on the run, hedge fund fraudster Michael Berger is back in custody. And though he need not worry about facing the music in the U.S., his homeland has its own plans for the man whose Manhattan Investment Fund lost some $400 million betting against Internet stocks in the late 1990s.

Berger, who went on the run in March 2002 after pleading guilty to securities fraud in New York two years earlier, was arrested near Wels, Austria, while driving towards Salzburg, by Austrian police.

“He was in hiding,” a spokesman for Austria’s federal police told the Associated Press. “It took quite a long time until we hit on where he was.”

Although Austria will not extradite Berger, an Austrian national, to the U.S., the Austrian police said the Federal Bureau of Investigation was involved in the hunt for the fugitive. But among the losers in his funds—and there were many, as the Manhattan fund lost some $400 million of the $575 million it raised—was Bank Austria, and Austrian authorities have charged Berger with fraud there.

Berger had faced up to 10 years in prison and a $1.25 million fine in the U.S.

In addition to bad investment timing—not only did Berger bet against Internet stocks from 1996 to 1999, while their price soared, his fund went belly-up in January 2000, just two months before the Internet bubble burst he’d hoped for came—Berger admitted he lied in statements to investors. Prosecutors say he overstated both the fund’s performance and its market value.

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