Lauer Hits Back At SEC

by Carla Johnson, Investors Offshore.com

23 September 2003

Disgraced hedge fund manager, Michael Lauer has hit back against SEC claims that he systematically manipulated the market in order to overvalue the value of stocks held by the Lancer Partners and Lancer Offshore hedge funds.

In a complaint filed with Florida's Southern District Court in July, the US Securities and Exchange Commission alleged that Mr Lauer, in conjunction with several other defendants, had manipulated month-end closing prices of securities held by Lancer hedge funds in order to overstate their value.

The regulator also claimed that he had made false and misleading claims in marketing materials for the funds, and announced its intention to seek disgorgement, civil fines, and other penalties against Lancer and its principal.

However, in an affadavit filed this week, Mr Lauer denied "the essence" of the SEC's claims against him, arguing that:

"Trading of securities on the last day of a month, or a year, is traditionally significantly more expensive than on other days with respect to all stocks in all markets. This is a well-documented phenomenon, and there is nothing illegal about it. Nor is it illegal for the funds to have held positions in stocks which were thinly traded."

He continued:

"Indeed, this aspect of the funds' investment policy was fully disclosed to investors...All of our written material to investors emphasized that at any given time it would be difficult if not impossible to liquidate the Lancer positions.'

Mr Lauer went on to accuse the SEC of failing to establish a coherent theory to support its allegations, and suggested that: "Nor has the SEC offered even a rational estimate of investor losses attributable to my alleged overvaluation."

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