By Jonathan Stempel
March 20 (Reuters) - 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 hiding.
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.
Also on HuffPost:
In what is now considered to be one of the biggest and most famous Ponzi schemes in history, Madoff laundered about $65 billion, <a href="http://www.forbes.com/2009/03/13/bernie-madoff-fraud-personal-finance-financial-advisor-network-ponzi-scheme.html">Forbes reports</a>. Madoff defrauded thousands of investors, all of whom can be found on a <a href="http://www.huffingtonpost.com/2009/02/04/madoff-victims-list-relea_n_164097.html">163-page list</a>.
Ex-Goldman Rajat <a href="http://www.huffingtonpost.com/2012/10/24/rajat-gupta-sentenced-insider-trading_n_2010861.html?utm_hp_ref=business" target="_hplink">Gupta was sentenced to two years</a> in prison for participating in one of the largest insider trading schemes in history.
Kerviel was found guilty of one of the world's most colosal trading frauds in 2010. He cost France's Société Générale bank 4.9 billion Euros. He was sentenced to 3 years in jail and was also sentenced to paying a $7 billion fine, <a href="http://www.guardian.co.uk/business/2012/oct/24/french-rogue-trader-loses-appeal?newsfeed=true">The Guardian reports</a>.
Steven Goldberg, Peter Grimm and Dominick Carollo
Goldberg, Grimm and Carollo were found guilty of conning the I.R.S. and cities in a "bid-rigging scheme" during their time at General Electric, <a href="http://www.businessweek.com/news/2012-05-11/ex-ge-bankers-convicted-of-municipal-bond-bid-rig-scheme">Businessweek reports</a>. Goldberg was sentenced to four years in prison. Grimm and Carollo were each sentenced to three years.
Raj Rajaratnam, the former head of Galleon Management, was sentenced to 11 years in jail in October 2011, the longest prison term for insider trading to date,<a href="http://www.washingtonpost.com/business/economy/hedge-fund-billionaire-gets-11-year-sentence-in-fraud-case/2011/10/13/gIQAa0PZhL_story.html"> The Washington Post reports</a>.
During Nick Lesson's time at Bristain's Barings Bank, he lost 862 million pounds and even managed to level the 233-year-old bank itself, according to <a href="http://www.telegraph.co.uk/finance/personalfinance/fameandfortune/9483379/Barings-rogue-trader-Nick-Leeson-Money-is-not-my-motivation.html">The Telegraph</a>. He served four years in a Singapore jail before he was released early with life-threatening cancer.
Currently serving 110 years in prison, Allen Stanford was, at one time, one of the richest men in America, <a href="http://www.cnbc.com/id/49276842/Allen_Stanford_Descent_from_Billionaire_to_Inmate_35017_183">according to CNBC</a>. He conned about 20,000 investors out of their money in a Ponzi scheme.
Garth Peterson, the former head of Morgan Stanley's Chinese real-estate investments unit, was sentenced to 9 months in jail last August for bribery, <a href="http://online.wsj.com/article/SB10000872396390444508504577593950506343444.html">according to The Wall Street Journal</a>.
Bradley Birkenfeld spent more than 2 years in jail for assisting in income tax evasion while working at UBS. He then volunteered inside information on Swiss banking to the I.R.S., and was rewarded with $104 million for being a whistle-blower, <a href="http://www.nytimes.com/2012/09/12/business/whistle-blower-awarded-104-million-by-irs.html?_r=0">according to The New York Times</a>.
Don Of Thieves
Dennis Levine, Martin Siegel, Ivan Boesky and Michael Milken defrauded Wall Street investors in the 1980's. In a scandalous series of events, Levine stole confidential documents from Lazard Freres investment bank, and the crew made use of inside information, according to <a href="http://www.thedailybeast.com/newsweek/1991/10/13/wall-street-a-greed-apart.html">The Daily Beast</a>.