Fugitive Fund Manager Stuffed Underwear With Cash, Fled; founder and former chief investment officer of Absolute Capital is accused of “cross trading” hundreds of millions of shares of penny stocks between the company’s funds to boost the value of the otherwise illiquid stocks

Fugitive Hedge Fund Manager Homm Arrested at Gallery

Florian Wilhelm Jurgen Homm, the German hedge-fund manager who has been a fugitive for more than five years, was arrested at the Uffizi Gallery in Florence on U.S. fraud charges.

Homm, 53, allegedly caused at least $200 million in losses to investors in hedge funds operated by Absolute Capital Management Holdings Ltd., according to a statement by the U.S. attorney’s office in Los Angeles. Homm was arrested yesterday by Italian authorities following a U.S. request, according to the statement.

Federal prosecutors in Los Angeles filed a criminal complaint March 6, charging Homm with conspiracy and fraud. The founder and former chief investment officer of Absolute Capital is accused of “cross trading” hundreds of millions of shares of penny stocks between the company’s funds to boost the value of the otherwise illiquid stocks.

The trades, through a Los Angeles-based broker-dealer that Homm co-owned, generated fees for Homm and Absolute Capital and also inflated the price of Absolute Capital on the London Stock Exchange, Alternative Investment Market, according to the statement. Homm “dumped” his shares and resigned from Absolute Capital on Sept. 18, 2007, “in the middle of the night,” according to the statement.

$53 Million

Homm and his co-conspirators made more than $53 million from the scheme, prosecutors said.

Adam Kravitz, a Miami lawyer who represents Homm in a civil lawsuit brought by the U.S. Securities and Exchange Commission, declined to comment on the criminal charges.

Absolute Capital managed as much as $2.1 billion in September 2007, when Homm quit the fund business he ran from Mallorca, Spain, leaving a portfolio of hard-to-trade assets.

Homm recently published a book in German called “Rogue Financier: The Adventures of an Estranged Capitalist,” according to an affidavit by a Federal Bureau of Investigation agent filed in support of the arrest warrant.

In the book, Homm, who is about 6 foot, 6 inches (2 meters) tall, wrote that he had “$500,000 stashed in my underwear, my briefcase and my cigar box,” when he left Palma de Mallorca on a private plane Sept. 18, 2007. His “mule and friend Giorgio” was carrying another $700,000, according to the translation in the affidavit.

‘Bimbos, Dogs’

“As the jet climbed I was profoundly unsettled, my mind in a dense fog,” Homm said in the book, according to the court filing. “I was breaking all connections to my former existence: colleagues, clients, acquaintances, friends, bimbos, dogs, family and children, and annihilating my fast fortune in the process.”

Chief U.S. District Judge George King in Los Angeles last month denied Homm’s request to dismiss the SEC’s claims against him. In his Dec. 19 request, Homm had argued that the SEC couldn’t sue him on basis of foreign transactions between foreign funds.

In a declaration filed with his request to dismiss the SEC’s claims, Homm said he lived in the U.S. for extended periods until the early 1990s and has only visited the U.S. sporadically since then.

“All of my activities were conducted in the good faith performance of my job, which was to increase the value of the relevant ACMH funds to the benefit of the ACMH funds’ investors,” Homm said in the declaration.

SEC Allegations

The SEC in February 2011 accused Homm and the other co- owner of Beverly Hills-based Hunter World Markets Inc., the broker-dealer through which the funds controlled by Homm bought the microcap companies’ shares, of “portfolio pumping.”

The SEC alleged Homm and his co-defendants in the lawsuit brought microcap companies public through reverse mergers and manipulated the companies’ share prices upward before selling the shares to eight Absolute Capital hedge funds. Homm ran the alleged scheme from September 2005 to September 2007, according to the SEC.

The case is U.S. v. Homm, U.S. District Court, Central District of California (Los Angeles). The SEC case is Securities and Exchange Commission v. Ficeto, 11-cv-01637, U.S. District Court, Central District of California (Los Angeles).

To contact the reporter on this story: Edvard Pettersson in the Los Angeles federal court house at +1- epettersson@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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