By Alistair Barr –
SAN FRANCISCO (CBS.MW) — Hedge-fund manager Charles Harris sent a DVD to investors admitting he’d lied about big losses, according to the U.S. Commodity Futures Trading Commission.
Harris sent the disc to key investors in his Tradewinds International II hedge fund in July tearfully confessing that a reported 12 percent gain for 2003 was in fact a “significant” loss from trading commodity futures, the CFTC said in a Sept. 1 complaint filed with the U.S. District Court for the Northern District of Illinois.
Harris, aged 44, also told investors that he’d fled the U.S. and taken the remaining assets of the fund offshore, the CFTC added.
“We don’t where he is, but efforts are being made to track him down,” said Joan Manley, deputy director of enforcement at the CFTC Friday.
While the DVD depicts Harris in tears, the recording stops and restarts regularly, Manley added.
“Cynics like me wonder whether these are tears of contrition or those of a crocodile,” said Manley. “This video should be viewed with skepticism.”
CBS MarketWatch was unable to contact Harris. He is not currently represented by an attorney, Manley added.
“In cases like this where we’re worried people are running off with investors’ money, we try to convince the court to issue an initial order quickly without hearing the other side of the story,” she said. Harris has “a few days to present counter evidence.”
U.S. District Court Judge Blanche Manning issued a restraining order against Harris and his fund on Sept. 1, freezing his assets and prohibiting the destruction of fund records. The CFTC alleges that Harris misrepresented the value of his fund, issued fraudulent statements to investors and used their money for personal purposes.
From September 1995, Harris raised at least $10 million from more than 30 investors, the CFTC said. By 2003, Harris was telling investors that assets in the Tradewinds International II fund had reached between $18 million and $23 million, when commodity futures trading account statements showed the fund had just $1.1 million, the CTFC alleged.
By the end of 2003, the fund had just $30,000, said the CFTC, which is seeking a permanent injunction against Harris, the return of investors’ money and fines.
Alistair Barr is a reporter for CBS.MarketWatch.com in San Francisco.