FORMER PRINCIPAL OF BOCA RATON STOCK BROKERAGE FIRM CONVICTED OF CONSPIRACY TO COMMIT SECURITIES FRAUD IN CONNECTION WITH THE LANCER HEDGE FUND SCHEME
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, announced today that Laurence Isaacson, the former principal of a Boca Raton stock brokerage firm, was convicted by a jury on July 20, 2010 of conspiracy to commit securities fraud in connection with an investment scheme involving the Lancer hedge funds. Isaacson was convicted after a five-week trial before U.S. District Court Judge Adalberto Jordan, in United States v. Michael Lauer et al., Case No. 08-20071-Cr-Jordan. Sentencing for Isaacson is scheduled for October 21, 2010.
Isaacson was one of five defendants named in the indictment, which was unsealed in February 2008 in Miami. Included in the indictment are Michael Lauer, Martin Garvey, and Eric Hauser, who were the co-owners of management companies that directed the Lancer hedge funds’ investment activities. Isaacson and Milton Barbarosh, who were based in Boca Raton, Florida, had financial interests in several "shell" companies in which the Lancer hedge funds invested. During the relevant time, Isaacson was the principal of a stock brokerage firm named the Thornhill Group, which was registered with the Securities and Exchange Commission. Isaacson had previously been sanctioned by the National Association of Securities Dealers for failing to disclose his affiliation with several of the shell companies that the Lancer hedge funds invested in. Hauser and Barbarosh previously entered guilty pleas in this case.
According to the indictment, Lauer, as founder and primary manager, formed and directed several hedge funds, collectively known as the Lancer hedge funds. From October 1999 to July 2003, Lauer and several of his co-conspirators manipulated the closing market prices of thinly-traded shell company securities to falsely inflate the value of the Lancer hedge funds. Lauer, Isaacson, and Barbarosh identified "shell" companies, including ones owned by Barbarosh, in which the Lancer hedge funds would buy large quantities of "restricted" stock at pennies per share in private transactions. Lauer, Garvey and Hauser next directed brokers to buy small amounts of the same securities for the Lancer hedge funds at a much higher open market price and to make additional small purchases to drive up the price to a closing "target price." Lauer then falsely valued all of the securities held by the Lancer hedge funds, including those restricted shares obtained for pennies per share, at the much higher closing price. As a result, the indictment alleges that victims suffered more than $200 million in losses.
To cover up and perpetuate the scheme, the indictment alleges, Lauer created fake portfolios of the securities supposedly held by the Lancer hedge funds and obtained falsely inflated appraisals of the shell companies through Isaacson and Barbarosh. An indictment is merely a charge. All defendants are presumed innocent until proven guilty.
Mr. Ferrer commended the investigative efforts of the FBI. This case is being prosecuted by Assistant U.S. Attorneys Harold Schimkat and Christopher Hunter, and Jack Patrick, Senior Litigation Counsel in the Department of Justice’s Criminal Division's Fraud Section.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.