BRIDGEPORT, Conn. (HedgeWorld.com)–The former chief operating officer of Durus Capital Management LLC was sentenced to one year of probation and a fine of $10,000 Monday [March 6].
Douglas Schmidt had pleaded guilty five months before to a charge of aiding and abetting the filing of false reports with the Securities and Exchange Commission. The charge carried a maximum penalty of 20 years imprisonment and a fine of $5 million.
“It is our hope that this prosecution will send a message to hedge fund operators that the federal government is watching,” U.S. Attorney Kevin O’Connor said in a statement issued Monday. “The failure to obey securities laws, especially by making false statements in SEC filings on which investors rely, is a serious crime. Violators will be vigorously prosecuted.”
On Dec. 21, 2005, Scott Sacane, Durus’s owner, waived indictment and pleaded guilty to one count of violating the Investment Advisers Act of 1940 in connection with a market manipulation scheme. Mr. Sacane will be sentenced on June 28.
In another enforcement matter, a federal court judge for the southern district of Florida found Michael Lauer guilty of contempt on Jan. 24 for violating an asset freeze order, failing to participate in the discovery process in good faith, and repeatedly violating court orders. Mr. Lauer, founder of Lancer Management Group LLC, has in court filings (he is representing himself) referred to the attorneys for the SEC as “increasingly rabid and … authority-abusing.”
The relevant authority, the district court, held an evidentiary hearing on the contempt charge in December 2005, and the contempt finding resulted. Judge Kenneth A. Marra has ordered Mr. Lauer to return all assets that he transferred since the freeze on July 10, 2003, an amount the court sets as at least $172,258, within 20 days. In the event of non-compliance, Mr. Lauer could face a daily monetary penalty of $1,000 per day.
Judge Marra also ordered Mr. Lauer to reimburse the SEC’s attorney’s fees and travel costs and expenses.