Court finds Bay Area hedge fund manager in contempt
SAN FRANCISCO (Legal Newsline) - A judge for the U. S. District Court for the Northern District of California on June 2 issued an Order Finding Defendants in Civil Contempt against Lawrence R. Goldfarb and Baystar Capital Management.
According to the Securities and Exchange Commission, Goldfarb and Baystar failed to pay disgorgement in compliance with the provisions of a final judgment entered against them on March 16, 2011, and furthermore failed to demonstrate that they reasonably attempted to comply with their disgorgement obligations.
The SEC filed a complaint against Goldfarb and Baystar Capital for engaging in fraud.
They allegedly took $12 million in proceeds from an investment under their management and misappropriated those proceeds for their own use, rather than distributing those proceeds to investors.
The defendants consented to the entry of a Final Judgment against them without admitting or denying the Complaint's allegations. They said they would pay, among other things, $12,112,416 in disgorgement and $1,967,371 in prejudgment interest to the court's registry within 365 days of entry of the Final Judgment. Defendants also agreed to make four progress payments, including a $1.025 million payment due within 180 days of entry of the Final Judgment.
The defendants made only three progress payments totaling $80,000 in disgorgement, but failed to make the $1.025 million progress payment or the final payment, the SEC said.
The court said the defendants were in breach of the Final Judgment. The court also found that defendants had failed to establish a good faith effort to fulfill their disgorgement obligations because, among other things, they used available funds for large personal expenses such as courtside seats to Golden State Warriors games, charters of aircraft for personal trips, Goldfarb's mortgage payment and numerous personal vacations, rather than to pay disgorgement.
A receiver has been appointed over the defendants' assets and reaffirmed its prior order limiting Goldfarb's monthly spending.