Oops, I lost cash again
Britney Spears slips up as hedge fund collapses, writes Paul Lashmar
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Your support makes all the difference.op star Britney Spears and jailed former Sotheby's chairman Alfred Taubman are among the investors who have lost money in a $800m (£500m) hedge fund scandal.
An application was made in the British Virgin Isles to place two parent companies of Lancer Offshore Fund Group into administration last week. One of the hedge fund group's investment partnerships, Lancer Partners, has already filed for bankruptcy protection in Connecticut, citing Spears and Taubman among 110 "Equity Security Holders". It is not the first time the 22-year-old pop star has lost money on a financial venture. Her New York restaurant, Nyla, filed for bankruptcy two months ago owing thousands of dollars. It was open for only five months.
But it is the first time that a hedge fund has ever filed for Chapter 11 protection, which exists to protect American companies from their creditors while allowing them to reorganise.
Observers doubt whether Lancer will reorganise as the suspicions of securities fraud grow. The full extent of the group's insolvency is still not publicly known, since its filings are incomplete and there is no up-to-date information about assets and liabilities.
"Lancer Offshore is believed to have liabilities of more than $370m and assets of dubious real worth, which would make it one of the biggest ever hedge fund collapses," said David Mar- chant of the Miami-based Offshore Alert newsletter, which has been monitoring the fund. "Its managing director, Bruce Cowen, was indicted last year in Florida for securities fraud. One of its principal business partners, Joseph Giamanco, was banned for life by the American Stock Exchange in 2001. Another business partner, Abraham Salaman, was criminally convicted in New York of conspiracy to commit securities fraud involving the Mafia, and Lancer's principal, Michael Lauer, won't show investors the fund's books."
An application to place Lancer Offshore and The Omnifund, the second parent company, into administration was filed by the British Virgin Islands Financial Services Commission at the local High Court on 2 May 2003. The Omnifund is believed to have liabilities of around $450m, taking the total losses of the group past $800m.
A hearing to determine whether to grant the application was due to be held on 5 May, but had to be put back until 30 May after objections were filed.
"The Commission is of the opinion that the defendants are carrying on or are likely to be carrying on business in a manner detrimental to the interests of its investors," said the application. It also referred to "complaints made by investors against the defendants and their functionaries" in respect of their "failure to honour investors' requests for the redemption of shares".
Meanwhile, sources report that the Department of Justice and the Securities and Exchange Commission have opened investigations into the Lancer Offshore Fund.
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