WASHINGTON, Feb. 19 /PRNewswire-USNewswire/ -- Five individuals who
defrauded hedge fund investors of more than $200 million dollars have been
indicted on charges of conspiracy and wire fraud, Assistant Attorney
General Alice S. Fisher of the Criminal Division and U.S. Attorney R.
Alexander Acosta of the Southern District of Florida announced today.
Defendants named in the indictment, unsealed today in Miami, are
Michael Lauer, Martin Garvey, and Eric Hauser, co-owners of management
companies which directed the hedge funds, and Laurence Isaacson and Milton
Barbarosh, who had financial interests in Boca Raton, Fla.-based "shell"
companies in which the hedge funds invested. All of the defendants are
charged with one count of conspiracy to commit mail, wire and securities
fraud and six counts of wire fraud. If convicted, each of the defendants
faces a maximum sentence of 20 years and a $250,000 fine for each count of
wire fraud and five years and a $250,000 fine for the conspiracy count. The
indictment also seeks forfeiture of their criminal proceeds.
According to the indictment, Lauer, as founder and primary manager,
formed and directed several hedge funds, collectively known as the Lancer
Group hedge funds. From October 1999 to July 2003, Lauer and his
co-defendants manipulated the closing market price of thinly-traded shell
company securities to falsely inflate the value of the Lancer Group hedge
funds. Lauer, Isaacson, and Barborosh identified "shell" companies,
including ones owned by Barbarosh, in which the Lancer Group would buy
large quantities of "restricted" stock at pennies per share in private
transactions. Lauer, Garvey and Hauser next directed brokers to buy a small
amount of the same securities for the Lancer Group at a much higher open
market price and to make additional small purchases to drive up the price
to a closing "target price." Lauer then falsely valued all of the
securities held by the Lancer Group, including those restricted shares
obtained for pennies per share, at the much higher closing price, which
falsely boosted the 20 percent performance fees paid to the management
companies; induced new investors to buy into the funds; and kept existing
investors in the funds.
To cover up and perpetuate the scheme, the indictment alleges, Lauer
also created fake portfolios of the securities supposedly held by the
Lancer Group and obtained falsely inflated appraisals of the shell
companies through Isaacson and Barbarosh.
An indictment is merely a charge. All defendants are presumed innocent
until proven guilty.
The case was investigated by the FBI and is being prosecuted by Jack
Patrick, Senior Litigation Counsel in the Criminal Division's Fraud
Section, and Harold Schimkat, Assistant U.S. Attorney in the Southern
District of Florida.
SOURCE U.S. Department of Justice
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