Ex-Millennium Global manager gets four years in prison over fraud

NEW YORK Mon Jun 23, 2014 2:48pm EDT

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NEW YORK (Reuters) - A former London-based portfolio manager was sentenced to four years in prison on Monday for inflating his hedge fund's assets by manipulating the value of Nigerian debt.

Michael Balboa, a former portfolio manager at Millennium Global Investments Ltd, was also ordered by U.S. District Judge Paul Crotty in New York to forfeit $2.2 million prosecutors say he earned in the scheme and pay $390 million in restitution over investor losses.

A jury in December found Balboa, 45, guilty of securities fraud, wire fraud, investment adviser fraud and two counts of conspiracy, after an earlier trial ended in a mistrial.

Due to the losses involved, Crotty said advisory federal sentencing guidelines called for a life term. The judge said the guidelines "vastly overstates the seriousness of the offense."

Joseph Tacopina, Balboa's lawyer, said prosecutors had said as part of a proposed plea deal his client did not accept they would recommend a sentence of five years in prison. Tacopina said Balboa would appeal.

"He personally didn't cause an investor to lose one dollar," Tacopina said in court.

The case centered on Millennium Global Emerging Credit Fund, which invested in emerging markets corporate and sovereign debt. The fund once reported $844 million in assets, according to the U.S. Securities and Exchange Commission.

Prosecutors said Balboa, who ran the emerging credit fund from December 2006 to October 2008, inflated the value of illiquid warrants tied to Nigerian debt, in an effort to increase the apparent performance of the fund and boost his compensation.

As part of the scheme, which began in January 2008, Balboa instructed two co-conspirators to provide inflated values for the warrants to an independent valuation agent used by Millennium, prosecutors said.

While the warrants in 2008 traded for no higher than $239, Balboa instructed his co-conspirators to give the agent values of $525 to $3,500, prosecutors said.

The inflated valuations resulted in the emerging credit fund's own value to be overstated by about $80 million as of August 2008, prosecutors said.

Balboa that year earned $8.14 million, $2.2 million derived directly from the scheme, the government said in a court filing last week.

The emerging credit fund shut down in October 2008. Charges by the U.S. Justice Department and SEC were announced in 2011.

The case is U.S. v. Balboa, U.S. District Court, Southern District of New York, No. 12-cr-00196.

(Reporting by Nate Raymond in New York; Editing by Cynthia Osterman)

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Comments (1)
JamVee wrote:
This is still about 10 years short of the sentence he should have received. It is, however, the only way to curb such corporate crimes . . .


If you don’t do this, those same “managers” will do it over and over again. After all, if you don’t jail them, they will just pay the fines out of the corporate coffers (it’s no skin off their paycheck).

Jun 23, 2014 3:20pm EDT  --  Report as abuse
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