Ex-Visium fund manager convicted of fraud by Manhattan jury

Reuters News
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Posted: Jan 19, 2017 1:18 PM

By Nate Raymond

NEW YORK (Reuters) - A former portfolio manager at Visium Asset Management LP was convicted of fraud on Thursday, following a trial that stemmed from a federal investigation that led to the New York-based hedge fund's closure last year.

Stefan Lumiere, whose sister had married Visium founder Jacob Gottlieb, was found guilty by a federal jury in Manhattan on securities fraud, wire fraud and conspiracy charges. The jury needed less than two hours to reach a verdict.

Prosecutors said Lumiere, 46, and others deceived investors through a mismarking conspiracy while overseeing the Visium Credit Opportunities Fund, which in 2012 reported peak net assets of $471.5 million. Visium closed the fund in April 2013, court papers show.

Eric Creizman, a lawyer for Lumiere, told reporters that his client plans to appeal.

The trial followed a federal probe of Visium that prompted the $8 billion firm's wind-down and charges against three others, including Sanjay Valvani, a portfolio manager who committed suicide in June after being accused of insider trading.

According to prosecutors, Lumiere helped rig the process of the Visium fund's distressed debt holdings by, among other things, obtaining sham quotes from brokers, who gave them the inflated values they wanted, prosecutors said.

This allegedly caused the fund's net asset value to be overstated by tens of millions of dollars each month, and deceived investors into believing the bonds were relatively liquid.

In his closing argument earlier in the day, Creizman maintained that Lumiere had no incentive to inflate the fund's value, and challenged prosecutors' claim that Lumiere had been motivated by greed after having been denied a bonus.

Creizman called his client the "low man on the totem pole" at Visium, where his boss thought he did a poor job and where Gottlieb was in the midst of divorcing Lumiere's sister.

"Stefan Lumiere had no motive to commit this crime," he said.

But Assistant U.S. Attorney Joshua Naftalis countered that Lumiere, wanting to keep his job, was seeking to inflate the value of the bond fund's securities holdings after his positions sustained losses and investors began pulling out.

"He needed a way to keep the score himself," he said. "So he corrupted the valuation process... Lumiere put garbage into the process, and garbage got spit out right back to investors."

The case is U.S. v. Lumiere, U.S. District Court, Southern District of New York, No. 16-cr-00483.

(Reporting by Nate Raymond in New York; editing by Grant McCool, Bernard Orr)