UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16838 / December 21, 2000
Securities and Exchange Commission v. Michael L. Smirlock and LASER Advisers Inc., 00 Civ. 9680 (RO) (S.D.N.Y.)
SEC CHARGES INVESTMENT ADVISER AND ITS FORMER CEO WITH DEFRAUDING INVESTORS IN THREE HEDGE FUNDS
Michael L. Smirlock and LASER Advisers Inc. Charged With Securities Fraud
The Securities and Exchange Commission today filed an enforcement action charging Michael L. Smirlock and LASER Advisers Inc., an investment adviser, with defrauding investors in three hedge funds. Smirlock, 44, of Loveladies, NJ, is the Chairman, majority shareholder and former President and CEO of LASER. LASER is located in Short Hills, N.J. Smirlock and his firm are charged with engaging in a scheme to falsely inflate the value of an investment portfolio that they managed for the three hedge funds. As a result of the scheme, the value of the assets held in the investment portfolio were overstated by $71 million. According to the complaint, certain of the investors in the hedge funds purchased interests while Smirlock conducted this scheme.
The Commission's complaint alleges as follows:
The complaint charges that, following the initial revelation of his fraudulent conduct, Smirlock resigned as President and CEO of Laser Advisers; however, he continues to be the majority shareholder and to function as a director and Chairman of the Board.
Smirlock was the subject of a previous SEC enforcement action. In November 1993, he was charged with aiding and abetting violations of the antifraud and recordkeeping provisions of the Investment Advisers Act of 1940, and ordered to cease and desist from future violations and to pay a $50,000 penalty. Smirlock was also suspended for three months from association with any investment adviser.
According to the complaint filed today, by engaging in the described conduct, Smirlock and LASER Advisers Inc. violated the antifraud provisions of the Securities Exchange Act of 1934 (Section 10(b) and Rule 10b-5 thereunder); LASER Advisers Inc. violated the antifraud provisions of the Investment Advisers Act and Smirlock aided and abetted those violations (Sections 206(1) and 206(2)); and LASER Advisers Inc. violated the recordkeeping provisions of the Investment Advisers Act of 1940 and Smirlock aided and abetted those violations (Section 204 and Rules 204-2(a)(16) and 204-2(e)(3) thereunder). Smirlock is also charged with violating the Commission's November 1993 cease-and-desist order.
The Commission is seeking permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against both Smirlock and LASER Advisers Inc.
The United States Attorney for the Southern District of New York has filed criminal charges against Smirlock, arising from the same conduct charged in the SEC complaint.