Ex-Millennium Manager Indicted in Fraud Case
Ex-Millennium Global Investments Ltd. portfolio manager Michael Balboa was indicted on securities fraud charges following his arrest in December for allegedly participating in a scheme involving Nigerian sovereign debt,
Balboa, who worked at Millennium from December 2006 to October 2008, was named in the four-count indictment unsealed March 1 in federal court in Manhattan. Balboa is charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud, securities fraud and wire fraud.
Prosecutors said Balboa, who was based in London, and two unnamed co-conspirators participated in a 10-month scheme in 2008 in which he sent “phony mark-to-market quotes” to an independent valuation agent who inflated month-end market prices for Nigerian warrants.
He overstated the value of the fund’s illiquid securities and securities positions and as a result, was able to generate “millions of dollars” in illegitimate management and performance fees.
Balboa earned about $6.5 million for his services to the fund, which was based on his fund’s performance, prosecutors said. As a result of the scheme, the fund was able to increase its total valuation for the Nigerian warrants from more than $12 million in January 2008 to more than $84 million in August 2008, the U.S. said.
The Securities and Exchange Commission filed a related lawsuit in December, claiming that Balboa, of Surrey, England, and BCP Securities LLC broker Gilles De Charsonville of Madrid used the overvalued securities positions to “generate millions of dollars in illegitimate management and performance fees.”
De Charsonville hasn’t been charged in Manhattan with criminal wrongdoing.
Balboa faces as long as 20 years in prison if convicted of the securities fraud, Manhattan U.S. Attorney Preet Bharara said at the time of Balboa’s arrest in December.
``I think this case is really one where I'm not sure the government has a full grasp of all the facts, because if they did, they'd be hard pressed to have indicted,'' Joseph Tacopina, a lawyer for Balboa, said in a phone interview. ``We intend to vigorously defend this case.''
Balboa’s fund, which bought emerging-market debt, was liquidated by London-based Millennium Global after lenders withdrew credit in the wake of the financial crisis, two people familiar with the situation said in October 2008. His portfolio suffered almost $1 billion in losses, the SEC (SEC) said in court papers.
The criminal case is U.S. v. Balboa, 12-cr-00196, and the civil case is SEC v. Balboa, 11-cv-08731, U.S. District Court, Southern District of New York (Manhattan).
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