The former chief of a multimillion-dollar hedge fund accused of fleecing investors out of $200 million was acquitted Wednesday by a federal jury of securities fraud and related charges.
Michael Lauer, who ran the Lancer Management Group and affiliated companies in New York and elsewhere, raised his clenched fists in the air when the verdict was read and tightly hugged his attorney, assistant public defender Michael Caruso. Lauer had faced up to 25 years in prison and hefty fines if convicted.
"There was nothing illegal here," Lauer said in an interview after the verdict. "The outcome, I believe, was inevitable."
Also acquitted on all charges following a six-week trial was Lancer manager Martin Garvey. Three other Lancer employees previously pleaded guilty to fraud charges, with one sentenced to five years behind bars and the others awaiting sentencing.
Federal prosecutors declined comment on the acquittals. But in closing arguments and court documents, they contended that Lauer and the others illegally manipulated stock prices in shell companies to falsely boost the returns in the Lancer hedge fund. Those profits in turn increased fees charged by Lauer and the others, who made more than $40 million, according to court documents.
But Lauer and his attorney maintained throughout that he was simply an excellent securities trader who wanted to make top dollar but got involved with a shady consultant who severely damaged the hedge fund. Lancer filed for bankruptcy in 2003, which was followed by a Securities and Exchange Commission civil lawsuit that persuaded a federal judge in 2009 to order a $62 million judgment based on ill-gotten gains and interest against Lauer.
At the time, the SEC called the Lancer case "one of the largest hedge fund frauds in the history of the United States."
Lauer, 55 and originally from Ukraine, said he previously appealed the SEC penalty and will seek to have his other assets unfrozen so he can return to business. Lauer, who was indicted on the criminal charges in 2008, was represented by a court-appointed lawyer because he could not use his frozen money to pay one.
"This case was fraudulent from the beginning," Lauer said.
One of the 12 jurors, 61-year-old Charles E. Floyd of Miami, said prosecutors simply failed to prove criminal wrongdoing in the complicated financial case.
"There just wasn't enough proof. That's the way I saw it," Floyd said. "He was guilty of surrounding himself with a bunch of jerks."