U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20505 / March 21, 2008
Securities and Exchange Commission v. Michael Lauer, et al., Case No. 03-80612-CIV-MARRA/VITUNAC (S.D. Fla).
Michael Lauer Indicted on Conspiracy and Wire Fraud Charges
The Securities and Exchange Commission announced today that on February 19, 2008, the United States Attorney's Office for the Southern District of Florida unsealed an Indictment charging Michael Lauer and four other individuals with one count of conspiracy to commit mail, wire and securities fraud and six counts of wire fraud. If convicted, Lauer 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 properties obtained, directly or indirectly as a result of the alleged criminal violations.
The Indictment alleges that from at least October 1999 through July 2003, Lauer, as founder and primary manager, formed and directed several hedge funds, collectively known as the Lancer Group hedge funds, to manipulate the month-end closing prices of shares of thinly-traded shell companies' securities, to falsely overstate the value of the Lancer Group's holdings. According to the Indictment, Lauer purchased large quantities of restricted stock at pennies per share in private transactions and then purchased small amounts of the same securities for the Lancer Group to drive up the price by the end of the trading day. Lauer then falsely valued the securities held by the Lancer Group, including the restricted shares, at the much higher closing price, to pump-up the performance fees paid to the management companies, attract new investors to buy into the hedge funds, and induce current investors in the hedge funds.
The Indictment's allegations are based on the same conduct underlying the Commission's July 8, 2003, Complaint against Lauer in the United States District Court for the Southern District of Florida. The Commission charged Lauer with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940, and as "control person" for Lancer Group under Section 20(a) of the Exchange Act. On January 18, 2007, the Commission filed a motion for summary judgment against Lauer, which is pending before the Court.
For more information on earlier actions in this case, see Litigation Release No. 18226 (July 10, 2003), Litigation Release No. 18247 (July 23, 2003), Litigation Release No. 18991 (December 2, 2004), Litigation Release No. 19018 (December 30, 2004) and Litigation Release No. 19019 (December 30, 2004); Litigation Release No. 19042 (January 21, 2005), Litigation Release No. 19186 (April 15, 2005); Litigation Release No. 19590 (March 6, 2006); and Litigation Release No. 19661 (April 18, 2006).