* K1 founder Helmut Kiener, accomplice, charged
* More than $300 mln said to be lost
By Jonathan Stempel
Feb 7 A German hedge fund founder convicted in
his home country of running a Ponzi scheme faces U.S. charges
along with an accomplice over frauds that cost investors more
than $300 million, the U.S. Department of Justice said on
K1 Group founder Helmut Kiener, a 53-year-old trained
psychologist, was indicted on six counts of wire and bank fraud
and three counts of money laundering over alleged schemes to
defraud Bear Stearns Cos, Barclays Plc and BNP Paribas
Co-defendant John Tausche, a 61-year-old resident of Blowing
Rock, North Carolina, was charged with one count each of bank
fraud and money laundering, prosecutors said.
Dubbed a "mini-Madoff" by international press in reference
to swindler Bernard Madoff, Kiener was sentenced in July 2011 to
10-2/3 years in prison by a German court after confessing to a
fraud that prosecutors said cost investors 345 million euros
It is unclear whether Kiener has hired a lawyer to defend
against the U.S. charges, which were announced by U.S. Attorney
Zane Memeger in Philadelphia.
Patty Hartman, a spokeswoman for Memeger, said he plans to
seek the extradition of Kiener to face the U.S. charges, but no
timetable has been set.
Joseph Grimes, a lawyer for Tausche, said in a telephone
interview that his client is "cooperating with authorities in
this investigation and trying to do everything to make this
right." Court papers for Tausche were not immediately available.
Memeger said that between 2005 and 2008, Bear Stearns lost
$82 million as Kiener funneled its money from K1 through
Tausche's Oceanus offshore hedge funds and back to K1, creating
a false appearance that K1 funds were gaining in value.
Prosecutors also said Kiener from 2007 to 2009 fraudulently
induced Bear, Barclays and BNP Paribas to invest more than $100
million in two offshore funds he claimed were legitimate.
Instead, prosecutors said Kiener diverted the money for such
things as a $37.1 million Bombardier jet, a $21 million Florida
oceanfront property, a helicopter, two boats and luxury cars
including a Bentley, a Maybach and a Mercedes.
Tausche was accused of running a scheme involving K1 and
Oceanus that cost Barclays $137 million.
Kiener faces up to 200 years in prison and a $7.94 million
fine, and Tausche up to 40 years in prison and a $1.97 million
find, if convicted on all U.S. charges.
Some investors who lost money with Kiener have in recent
months sued Barclays in Europe for about 100 million euros ($134
million) for selling his products to them. Barclays has said the
claims have no merit.
Kiener's prison sentence in Germany was based on 10 counts
of fraud and tax evasion and 86 counts of falsifying documents.
"I am paying for being able to leave hell and return to
purgatory," he said at the time.
JPMorgan Chase & Co bought Bear in 2008.
The Kiener case is U.S. v. Kiener, U.S. District Court,
Eastern District of Philadelphia, No. 13-cr-00062.