Jury finds Lancer Management hedge fund defendant guilty

By Palm Beach Business.com

WEST PALM BEACH — A federal jury has found the former principal of a Boca Raton brokerage guilty of conspiracy to commit securities fraud in connection with massive hedge fund scam.

Laurence Isaacson, the former principal the Thornhill Group, was accused of failing to disclose his interest in shell companies that the hedge fund, known as Lancer Management, had invested in. According to the indictment, Lancer would buy large blocks of restricted stock — shares that can’t be traded publicly — for pennies a share in private deals.

The fund then would buy small quantities of publicly traded shares of the same companies at much higher prices.  Lancer then would value their entire holdings based on the amount paid for the public shares. Hedge fund managers would use these figures to attract prospective investors and to convince those that already bought into the funds to keep their money there.

At one point, Lancer claimed to have assets worth more than $1 billion, according to the Securities and Exchange Commission, which shut the hedge fund in 2003.

One stock that Lancer owned was Fidelity First Financial Corp., which had been a leader in the subprime mortgage business until 2000. By 2003, the company had no operations, had lost millions of dollars in recent years and had assets worth only about $25,000. Yet Lancer valued its Fidelity First holdings at $340 million.

Federal prosecutors say the scam cost investors at least $200 million.

Others involved in the scam include Michael Lauer, Lancer’s principal, Martin Garvey, Eric Hauser and Milton Barbarosh of Boca Raton. Hauser and Barbarosh have pleaded guilty.