Ex-Visium hedge fund manager cheated investors, U.S. jury hears

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By Nate Raymond | NEW YORK

NEW YORK An ex-portfolio manager at Visium Asset
Management LP corruptly sought to boost the value of one of its
hedge fund’s holdings, defrauding investors while enabling the
investment firm to earn millions of dollars, a U.S. prosecutor
told jurors on Wednesday.

Stefan Lumiere, the former brother-in-law of Visium founder
Jacob Gottlieb, violated the trust of investors through “fraud
and lies,” Assistant U.S. Attorney Damian Williams told jurors
at the start of a trial in federal court in Manhattan.

Lumiere and others rigged the process of valuing the bond
fund’s distressed-debt holdings by, among other things,
obtaining sham quotes from brokers, who gave them the inflated
values they wanted, Williams said in his opening statement.

“Ladies and gentleman, it is easy to look like a winner when
you can make up the score,” Williams said.

But defense lawyer Eric Creizman said Lumiere, 46, was
innocent. He urged jurors to be skeptical of two cooperating
witnesses formerly with Visium, and contended Lumiere acted in “good faith” in obtaining values for the fund’s securities.

“This is not picking a price out of the air,” he said. “It
was based on a number of things.”

The trial follows a probe of Visium that prompted the $8
billion firm’s wind-down and charges against three others,
including Sanjay Valvani, a portfolio manager who committed
suicide in June after being accused of insider trading.

Lumiere, who faces securities fraud and other charges, began
working at Visium in 2007 and served as portfolio manager for
Visium Credit Opportunities Fund from May 2009 to April 2013.

From 2011 to 2013, prosecutors said, Lumiere and others,
including portfolio manager Christopher Plaford, schemed to
defraud investors by mismarking the value of securities held by
the fund, which invested in debt issued by healthcare companies.

Prosecutors said the practices caused the fund’s net asset
value to be overstated by tens of millions of dollars each month
and deceived investors into believing the bonds were relatively
liquid, when they were not.

At trial, prosecutors plan to call as cooperating witnesses
Plaford, who pleaded guilty in June, and Jason Thorell, a former
Visium trader who Williams said turned whistleblower by taking
the matter to the U.S. Securities and Exchange Commission.

Thorell, who is expected to testify on Thursday, stands to
potentially earn a monetary reward for cooperating, a fact
Lumiere’s attorneys say indicates he is seeking a recovery from
the SEC’s whistleblower program.

The case is U.S. v. Lumiere, U.S. District Court, Southern
District of New York, No. 16-cr-00483.

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