A New York court has issued an order granting the commission’s motion for summary judgment against Michael Berger, the former investment managerof a hedge fund known as the Manhattan Investment Fund Ltd.

The court found Berger liable for securities fraud, ordered him to pay disgorgement of US$20,007,233.68 and a civil penalty of US$100,000. The order permanently enjoins him from violating the antifraud provisions of the federal securities laws.

The $20,007,233.68 disgorgement figure represents US$19,874,735.44 in management and incentive fees that Manhattan Capital Management Inc. – the advisory firm owned and controlled by Berger – was paid by the fund, as well as US$132,498.24 in prejudgment interest. The fund was organized under the laws of the British Virgin Islands and was open to non-US investors and tax-exempt U.S. investors.

The judge found that Berger commenced his fraudulent scheme almost immediately after the fund began its operations in mid-1996. As a result of Berger’s trading strategy, the fund consistently suffered losses which ultimately totaled nearly US$400 million.

Instead of accurately reporting the losses Berger created fictitious account statements which substantially overstated the market value of the fund’s holdings. The court concluded that “the fraud was conceived and executed in New York by Berger” and that “Berger acted willfully and knowingly in carrying out the fraud.”

Both MCM and the fund are the subject of Chapter 11 bankruptcy proceedings, and Berger remains the subject of a criminal proceeding brought by the US Attorney for the Southern District of New York.