ISLAND OFFICIALS HAMMER LANCER By CHRISTOPHER BYRON
May 8, 2003 -- In another blow to Park Avenue's troubled Lancer Group hedge fund empire, British Virgin Islands financial regulators have filed papers to force the group's flagship Lancer Offshore Fund into bankruptcy there.
If they are successful, the bankruptcy application could wind up costing investors as much as $850 million in losses - or roughly $1 billion, when added to the bankruptcy filing last month by the Lancer Group's smaller, domestic hedge fund operation, Lancer Partners.
Together, the two bankruptcies would amount to one of the largest hedge fund debacles since the collapse of Greenwich, Conn.-based Long Term Capital Management in 1998.
Improved oversight of hedge fund operations is now a top priority of the U.S. Securities and Exchange Commission, which is holding two days of hearings on the subject later this month.
The bankruptcy application against Lancer Offshore, filed Friday in Tortola, B.V.I., by that country's Financial Services Commission, charges that the fund is being run by its current managers "in a manner detrimental to the interests of its shareholders," and seeks to name a court-appointed administrator to take over its operations.
The U.S. and the British Virgin Islands share jurisdiction over the Lancer Offshore Fund, which has offices in New York but is registered as an offshore hedge fund in Tortola.
A spokesman for the Financial Services Commission - the rough equivalent of the SEC - said Tuesday that a hearing on the application has been set for May 30 in Tortola.
The Lancer fund attracted wealthy individuals from around the world during the 1990s, with a claimed track record of double-digit returns. In the summer of 2002, the fund issued an audited financial statement showing total assets under management of $853 million at year-end 2001.
But investors in the fund began asking for their money back after reading some fine print in the audit, done by the accounting firm of PricewaterhouseCoopers, that raised questions about how the fund was valuing the assets in its portfolio.
The Post has run a series of articles showing that many of the fund's holdings involved penny stocks of questionable value, and that the fund's top manager - an ex-Wall Street stockbroker named Michael Lauer - had a lengthy track record of business and investment ties to white-collar criminals and other Wall Street figures with histories of regulatory violations.
Both Lauer and the Lancer Offshore Fund are now suing The Post for libel and defamation.
Since March, the Group's troubles have escalated. Lancer's domestic fund, Lancer Partners, has been hit with numerous lawsuits by investors, and last month the fund filed for bankruptcy in a Connecticut federal court. Meanwhile, the Lancer Offshore Fund has lost its listing on the Irish Stock Exchange, and sources say the Department of Justice and the SEC have opened investigations into the fund's activities.
Phone calls to the Lancer Group were not returned. |
