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Superseding Grand Jury Indictment Adds New Fraud and Money Laundering Charges against Fugitive Hedge Fund Manager, Beverly Hills Broker, and 2 Homm Employees
LOS ANGELES – A former Beverly Hills stockbroker has been indicted – along with fugitive hedge fund manager Florian Homm and two others – in an alleged stock manipulation scheme designed to pump up the reported profits of the Homm-managed hedge funds in a fraud that caused investors to lose approximately $200 million.
A federal grand jury yesterday afternoon returned a superseding indictment that charges three others who alleged participated in a scheme orchestrated by Homm. The new defendants are: Todd Ficeto, 49, of Marion, Ohio, who formerly resided in Malibu; Colin Heatherington, 41, of Port Alberni, British Columbia, Canada; and Craig Heatherington, 38, of Queensland, Australia.
Ficeto today surrendered to federal authorities and is scheduled to be arraigned on the indictment this afternoon in United States District Court in downtown Los Angeles.
Florian Wilhelm Jürgen Homm, 53, was first indicted in March 2013 on charges of securities fraud and wire fraud after he was arrested in Italy (see: http://go.usa.gov/cBCcV). The superseding indictment returned yesterday adds the three new defendants and charges Homm in new counts with investment adviser fraud, money laundering and unlawful monetary transactions.
Homm was the founder and chief investment officer of Absolute Capital Management Holdings (ACMH), a Cayman Islands-based investment advisor that operated from Palma de Majorca in Spain and managed eight hedge funds (the Absolute Funds). Ficeto was the president of a Beverly Hills-based broker-dealer, Hunter World Markets, that he co-owned with Homm. Colin Heatherington was a stock trader at ACMH.
The superseding indictment charges Homm, Ficeto and Colin Heatherington in a conspiracy to commit securities fraud and eight counts of securities fraud. The indictment charges that, between September 2004 and September 2007, Homm directed the Absolute Funds to buy billions of shares of thinly traded, United States-based “penny stocks” through Hunter World Markets. Ficeto allegedly arranged the stock purchases and caused millions of shares of the same penny stocks to be given to Homm, Hunter World Markets, and CIC Global Capital, which was co-owned by the Heatheringtons
After the hedge funds invested hundreds of millions of dollars in the illiquid penny stocks, Homm and Colin Heatherington caused the hedge funds to trade the stocks among themselves in “cross-trades” made with the assistance of Ficeto at Hunter World Markets, according to the indictment. The cross-trades served to increase the trading prices of the previously illiquid stocks and, in turn, to boost the net asset values and apparent performance of the Absolute Funds, in a practice called “portfolio pumping.” This apparent performance improvement at the hedge funds generated additional fees for Homm and Absolute Capital. It also boosted Absolute Capital’s stock price on the London Stock Exchange, Alternative Investment Market, from which Homm profited by selling shares.
According to the indictment, while manipulating the trading of the penny stocks to falsely and artificially increase the profitability of the Absolute Funds, Homm, Colin Heatherington (through CIC Global Capital), and Ficeto also sold their own personal holdings of the same U.S. penny stocks to the Absolute Funds at the inflated prices, which the indictment alleges was simply embezzling money from the funds.
The indictment further charges two money laundering conspiracies. In the first scheme, Homm, Ficeto and other unnamed conspirators allegedly worked together in an elaborate conspiracy to launder Homm’s illicit proceeds throughout the world.
In the second scheme, Ficeto allegedly conspired with the Heatheringtons to launder the proceeds received from CIC Global Capital through Canada and Switzerland.
The indictment also charges various unlawful monetary transactions associated with the money laundering conspiracies.
The indictment further alleges that Ficeto engaged in unlawful monetary transactions by sending nearly $10 million of illicit proceeds to an account the Cook Islands, and then lied to the Securities and Exchange Commission about the Cook Islands account. Ficeto additionally is charged with Investment Adviser Fraud in connection with a hedge fund called the Hunter Fund, in which the Absolute Funds invested and also was used to conceal investments by the Absolute Funds in the penny stocks and to manipulate the stock market.
The indictment alleges that as the scheme unraveled, Homm dumped tens of millions of dollars of his own shares in Absolute Capital and resigned from the firm in the middle of the night on September 18, 2007.
In March 2013, Homm was taken into custody in Italy after being arrested at the Uffizi Gallery in Florence. Homm was arrested pursuant to a provisional arrest warrant sought by federal prosecutors in Los Angeles after they filed a criminal complaint containing charges related to the alleged fraud scheme. The United States sought Homm’s extradition to the United States and he was ordered extradited by the Italian Ministry of Justice, but Homm ultimately was released and is believed to have fled to Germany, where he remains a fugitive.
Colin Heatherington is believed to be in Canada, and Craig Heatherington is believed to be in Australia.
The indictment also contains a forfeiture allegation that would cause the defendants, if convicted of any of the securities or money laundering counts in the indictment, to forfeit to the United States “any and all property, real and personal, which constitutes or is derived from proceeds traceable to” any of those crimes.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
Each charge of conspiracy to commit securities fraud and securities fraud carry a statutory maximum penalty of 25 years in federal prison. The money laundering charges each carry a maximum penalty of 10 years in federal prison. Each charge of investment adviser fraud, obstruction of justice, and false statements carry a maximum statutory penalty of five years in federal prison.
The case against Homm is the product of an ongoing investigation by the Federal Bureau of Investigation. The United States Securities and Exchange Commission and Financial and Regulatory Authority provided assistance to the FBI’s investigation.
The United States Attorney’s Office wishes to thank the Swiss Office of the Prosecutor General of the Confederation for its support and assistance.