U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20751 / September 29, 2008
Securities and Exchange Commission v. Michael Lauer, et al., Civil Action No. 03-80612-CIV-MARRA/JOHNSON
Federal Court Grants Summary Judgment and Enters Permanent Injunction Against Michael Lauer in Major Hedge Fund Fraud Case
The Securities and Exchange Commission announced that on September 23, 2008, the Honorable Kenneth A. Marra, United States District Judge for the Southern District of Florida, granted the Commission's motion for summary judgment, in part, against Michael Lauer, the architect of a $1.1 billion hedge fund fraud scheme. The Court found that Lauer's fraud as head of Lancer Management Group and Lancer Management Group II that acted as hedge fund advisers was "egregious, pervasive, premeditated and resulted in the loss of hundreds of millions of dollars in investors' funds."
In its 67-page order, the Court found Lauer materially overstated the hedge funds' valuations for the years 1999-2002, manipulated the prices of seven securities that were a material portion of the funds' portfolios from November 1999 through at least April 2003, failed to provide any basis for the exorbitant valuations of the shell corporations that saturated the funds' portfolios, lied to investors about the hedge funds actual holdings by providing them with fake portfolios; and falsely represented the hedge funds' holdings in newsletters.
The Court permanently enjoined Lauer from further violating Sections 17(a)(1), (2) and (3) of the Securities Act of 1933; Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (Exchange Act), both individually and as a control person pursuant to Section 20(a) of the Exchange Act; and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The order reserved ruling on the amount of disgorgement Lauer should pay until the Court conducts an evidentiary hearing, and gave the SEC sixty days to propose a civil money penalty amount that Lauer should pay.
Lauer raised more than $1.1 billion from investors and his fraudulent actions resulted in investor losses of approximately $500 million. The SEC initially won emergency temporary restraining orders and asset freezes against Lauer and his companies, which were placed under the control of a Court-appointed receiver.
For further information, 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); Litigation Release No. 19661 (April 18, 2006); and Litigation Release No. 20505 (March 21, 2008).