Lancer Group founder Michael Lauer was found civilly liable for hedge fund fraud in 2008, with a South Florida court finding that his fraudulent actions brought about losses of approximately $500 million for his investors.

Government regulators and the Lancer Group's receiver expressed disappointment last week after Lauer escaped criminal liability in the same matter, with a South Florida jury acquitting Lauer of fraud charges in a Miami federal court.

"I was surprised by the acquittal, because there were findings against him on the civil side, but the standards are different to find criminal liability," said Lancer receiver Marty Steinberg.

Lauer, understandably, was jubilant. "There was simply no evidence, nothing illegal," he said following the verdict.

As with many stock fraud cases, the facts in the Lancer Group fraud matter seem facially quite complex and susceptible of varied interpretation. Indeed, they were cast in quite different lights in Miami, and the jury took more than three days before finding Lauer not guilty on wire fraud and conspiracy charges. Conviction in the matter could have resulted in a 25-year prison term and $500,000 in fines.

The charges against Lauer related to his alleged manipulations in driving up fund stock prices to artificially high levels. Specifically, the government argued that Lauer bought restricted stock of shell companies at very low prices in private arrangements and then ordered brokers to buy shares in the same companies at much higher, open-market prices. The intent was to create a momentum and inflated price for the securities, which would drive up the closing price, with the fund reaping the profits.

Lauer says he plans to resume managing hedge funds.

Related Resource: Bloomberg, "Lancer Group Founder Michael Lauer Acquitted of Stock Fraud in Hedge Funds" April 27, 2011