SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17230 / November 13, 2001
Securities and Exchange Commission v. Michael W. Berger, Manhattan
Investment Fund Ltd., and Manhattan Capital Management, Inc., Civil
Action No. 00 Civ. 0333 (DLC) (HP) (S.D.N.Y)
COMMISSION OBTAINS $20 MILLION JUDGMENT AGAINST MICHAEL W. BERGER IN
HEDGE FUND FRAUD CASE
On November 13, 2001, the Honorable Denise Cote of the United States
District Court for the Southern District of New York issued an opinion
and order granting the Commission's motion for summary judgment
against Michael W. Berger, the former investment manager of a hedge
fund known as the Manhattan Investment Fund, Ltd. (the "Fund"). The
judgment in finds Berger liable for securities fraud, orders him to
pay disgorgement of $20,007,233.68 and a civil penalty of $100,000 and
permanently enjoins him from violating the antifraud provisions of the
federal securities laws. The $20,007,233.68 disgorgement figure
represents $19,874,735.44 in management and incentive fees that
Manhattan Capital Management, Inc. ("MCM"), the advisory firm owned
and controlled by Berger, was paid by the Fund, as well as $132,498.24
in prejudgment interest.
In its Complaint filed January 18, 2000, the Commission charged
Berger, MCM and the Fund with a massive fraud in violation of the
antifraud provisions of the federal securities laws. Berger, 30, is an
Austrian citizen who resides in New York City. The Fund was organized
under the laws of the British Virgin Islands and was open to foreign
investors and tax-exempt U.S. investors. MCM was the New York-based
investment manager of the Fund. Berger owned and controlled MCM and
was its only officer. Through MCM, Berger directed the investment
activities of the Fund.
In her opinion and order, Judge Cote found that Berger commenced his
fraudulent scheme almost immediately after the Fund began its
operations in mid-1996. Judge Cote further found that, as a result of
Berger's trading strategy, the Fund consistently suffered losses which
ultimately totaled nearly $400 million. Instead of accurately
reporting the losses the Fund was experiencing, however Berger created
fictitious account statements which substantially overstated the
market value of the Fund's holdings. Judge Cote found that Berger
caused a fictitious account statement to be forwarded to the Fund's
administrator in Bermuda every month for 39 consecutive months. The
Fund's administrator then calculated the Fund's net asset value and
the market value of each investor's shares in the Fund based on
Berger's fabricated figures, and sent monthly account statements based
SNIPPETS:
Securities and Exchange Commission v. Michael W. Berger, Manhattan Investment Fund Ltd., and
COMMISSION OBTAINS $20 MILLION JUDGMENT AGAINST MICHAEL W. BERGER IN HEDGE FUND FRAUD CASE
The judgment in finds Berger liable for securities fraud, orders him to pay disgorgement of
The $20,007,233.68 disgorgement figure represents $19,874,735.44 in management and incentive
In its Complaint filed January 18, 2000, the Commission charged Berger, MCM and the Fund with
Berger, 30, is an Austrian citizen who resides in New York City.
In her opinion and order, Judge Cote found that Berger commenced his fraudulent scheme almost
Judge Cote further found that, as a result of Berger's trading strategy, the Fund
Instead of accurately reporting the losses the Fund was experiencing, however Berger created
Judge Cote found that Berger caused a fictitious account statement to be forwarded to the
The Fund's administrator then calculated the Fund's net asset value and the market value of
Both MCM and the Fund are the subject of Chapter 11 bankruptcy proceedings pending in the
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