Turns out the stories were true.
Berger Sued Critics, Saying They Caused Withdrawals
New York, Jan. 20 (Bloomberg) -- Michael Berger, the money manager sued by the Securities and Exchange Commission this week for fraud, filed his own suit last year, seeking at least $350 million from critics he said caused withdrawals from his fund.
The 29-year-old Austrian wanted to punish people he said were spreading false stories his Manhattan Investment Fund was losing money and headed for ''big trouble.'' He claimed investors yanked more than $50 million because of ''a scheme to injure and destroy'' his business.
Turns out the stories were true.
The SEC sued Berger for telling his investors he had made money since 1996, hiding losses of more than $300 million resulting from bets against the biggest bull market in history.
Berger declined to comment on the lawsuits. He said in a letter to investors last week he'd inflated the fund's assets.
His claim, filed in New York State Supreme Court in August 1999, didn't identify defendants. So-called John Doe suits are used when the plaintiff either doesn't know the names of the people he is suing or wants to hide their identity.
Court filings contained no responses from the 15 unnamed defendants in the suit, nor affidavits showing they were served with the suit.
Claims
Berger claimed in the suit that starting in December 1998, the unnamed parties told ''clients, prospective clients, investment groups and advisers'' that the fund ''was down 30 percent.'' Berger told investors he gained 12.4 percent in 1998.
He also claimed that people were saying that the fund was ''risky'' and had potential for ''big trouble;'' that Berger wasn't giving returning money to investors who had asked for it and that his company, Manhattan Capital Management, couldn't provide adequate services because ''it only had a few employees.''
In its civil fraud suit, the SEC accused Berger and the New York fund of inflating returns from its inception in 1996.
The fund invested money for wealthy individuals and institutional investors, making bets stocks -- mainly Internet companies -- would decline. Instead, they rose to records, resulting is losses for investors including Bank Austria AG and 300 clients of Credit Suisse Private Banking.
Berger had reported annual gains of between 12 percent and 27 percent since 1996.
''To hide these monumental losses from investors, defendants created account statements that materially overstated the performance and value of the hedge fund,'' the suit said.
To perpetuate the scheme, the fund paid shareholders who redeemed their shares more than the actual share value, the complaint contended.
The suit contended that the fund has less than $50 million in assets. Berger told customers in November the fund had $500 million.
Yesterday, U.S. District Judge Denise Cote in Manhattan appointed Helen Gredd, a partner at the New York law firm of Lankler Siffert & Wohl, as the receiver for Manhattan Investment Fund and Manhattan Capital. Gredd has the authority to take immediate custody and control of their assets.
The SEC said it's continuing its investigation.
Jan/20/2000 16:29
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