A federal judge in Florida ruled that the head of two hedge funds deceived investors about the funds’ holdings. Elsewhere, federal regulators accused a California investment adviser of making tainted recommendations to clients.
In the Florida case, U.S. District Judge Kenneth Marra ruled that Michael Lauer, the head of Connecticut-based hedge funds Lancer Management Group and Lancer Management Group II, engaged in a fraud that cost investors about $500 million, according to the Securities and Exchange Commission.
Marra granted the SEC’s request for summary judgment against Lauer, finding that he overstated the hedge funds’ values from 1999 to 2002, manipulated the prices of seven securities that were an important part of the portfolios, and deceived investors about the funds’ holdings by providing them with fake financial statements.
The judge could rule later on the SEC’s request for unspecified restitution and a penalty against Lauer.
Lauer, a resident of Greenwich, Conn., said Wednesday he planned to appeal the ruling. In his response to the SEC’s allegations, which he filed with the court in March, Lauer said “there is a real issue of material fact as to whether any securities law had been broken by” the Lancer funds.
Lauer said the SEC produced “no credible evidence” that he participated in or was even aware of any alleged wrongdoing.
In the California case, the SEC accused investment adviser WealthWise LLC of San Luis Obispo and its owner Jeffrey Forrest of fraud for failing to disclose a significant conflict of interest when recommending to clients that they invest in a hedge fund that made undisclosed subprime and other high-risk investments.
WealthWise and Forrest recommended to more than 60 clients that they invest about $40 million in Apex Equity Options Fund, a hedge fund managed by Thompson Consulting Inc. of Salt Lake City. In a civil lawsuit filed in federal court in Los Angeles, the SEC alleged that Forrest failed to disclose a financial side agreement that benefited WealthWise in those transactions.
The SEC is seeking unspecified restitution and penalties in that case. An attorney for WealthWise, Michelle Jacko, had no comment on the case.
