| March 20
March 20 Florian Homm, a flamboyant hedge fund
manager who was arrested in Italy this month after five years on
the run, has been indicted by a federal grand jury in Los
Angeles for running what prosecutors called a fraud that caused
investors to lose $200 million.
Homm, 53, was charged in an indictment made public on
Wednesday with eight counts of securities fraud, one count of
wire fraud, and one count of conspiracy.
Homm, the founder of Absolute Capital Management Holdings
Ltd, which claimed to oversee $2.1 billion of assets as of Aug.
31, 2007, has been in Italian custody since his March 8 arrest
at the Uffizi Gallery in Florence.
Italy is expected to extradite Homm to the United States,
where the self-described "rogue financier" faces as much as 25
years in prison on each of the securities fraud and conspiracy
charges, and up to 20 years on the wire fraud charge.
Prosecutors accused the German native of causing hedge funds
he controlled to buy and sell thinly traded penny stocks among
themselves, with many trades being funneled through Hunter World
Markets Inc, a Los Angeles broker-dealer he co-owned.
They said these "cross-trades" created artificial demand
that boosted the stocks' prices and inflated the hedge funds'
returns in a practice known as "portfolio pumping."
Prosecutors said this enabled Homm to attract new investor
cash and collect higher fees, including from Hunter World.
According to the indictment, the scheme began to collapse
after a former Absolute Capital employee sent an anonymous email
in April 2006 to banks and media detailing Homm's activities.
On Sept. 18, 2007, Homm disappeared from his luxury villa on
the Mediterranean island of Majorca under cover of night after
dumping tens of millions of dollars of Absolute Capital shares,
and leaving his investors with big losses, prosecutors said.
He was caught after Italian police, acting on an FBI tip,
followed Homm's former wife and son to the Uffizi, where they
met up with him. Police said they arrested Homm "very
discreetly" as the trio was admiring classical Greek sculptures.
Homm, a cigar smoker nicknamed "Steamroller" who stands 6
feet, 7 inches (2.01 meters) tall, had become something of a
celebrity in his native Germany, both as a symbol of greed and
for saving the soccer team Borussia Dortmund from bankruptcy.
In his recent autobiography "The Rogue Financier: Adventures
of an Estranged Capitalist," Homm, a Harvard Business School
graduate, told of having fled Majorca for Colombia in his
private plane, with cash stuffed into his underwear. He gave
occasional interviews to promote the book while he remained in
Homm has been contesting a related U.S. Securities and
Exchange Commission civil lawsuit over Hunter's activities. A
lawyer for Homm in that case did not immediately respond to a
request for comment.
The criminal case is U.S. v. Homm, U.S. District Court,
Central District of California, No. 13-cr-00183. The SEC case is
SEC v. Ficeto et al in the same court, No. 11-01637.