Micromed Cardiovascular Inc.(fka MMCO)

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Absolute Capital's Homm is sued for fraud by Colorado oil developer

By Katherine Burton
Bloomberg News Service

Article Last Updated: 01/07/2008 10:10:57 AM MST

Jack Grynberg, a Colorado-based developer of oil and natural gas, sued hedge-fund manager Florian Homm, saying he defrauded investors by buying penny stocks sold through a brokerage firm he secretly owned.

The suit, filed in U.S. district court in Denver last week, says Homm and Todd Ficeto, also named in the suit, each own 50 percent of Hunter World Markets Inc., a Beverly Hills, California-based broker. Hunter World earned a commission when the so-called Pink Sheet stocks were sold to three Absolute Capital Management Holdings Ltd. funds in which Grynberg invested a total of $12 million. Homm managed the funds.

Homm, a German native who managed the funds from Majorca, Spain, told the investor that no more than 10 percent of his money would be put in unlisted companies, the suit says. Instead, illiquid investments made up as much as 44 percent of Grynberg's investment, according to the suit.

"Homm intended, with the assistance of Ficeto and Hunter, to invest as much as possible of plaintiffs' funds into Pink Sheet, unlisted and illiquid stocks by purchasing them through his secretly owned brokerage, Hunter," the suit says.

Homm abruptly resigned from Absolute Capital on Sept. 18. Since his departure, shares of the money-management firm, which trade in London, have plummeted 92 percent to 31 pence.

Homm couldn't be reached for comment and Ficeto didn't return a call seeking comment. Absolute Capital isn't named in the suit.

Penny Stocks The suit also alleges that Homm defrauded investors by inflating the value of the illiquid stocks and then taking 20 percent of the fictitious profit as part of his hedge-fund fee.

Many of the so-called microcap stocks owned by the funds are now trading at prices far below their purchase price. Chatsworth, California-based Logistical Support Inc. was sold to Absolute Capital funds for 25 cents a share, according to the suit and a Securities and Exchange Commission filing. They now trade at 6 cents. Houston-based Micromed Cardiovascular Inc. shares, which were bought for $1 a share, now trade at 2 cents.

Redemptions in four Absolute Capital funds, including the three in which Grynberg invested, have been suspended for a year to give the hedge-fund firm time to sell the assets.

Grynberg, 75, made his fortune drilling for oil and gas around the globe. Earlier this decade, he sued more than 70 energy companies claiming they owed billions of dollars to the U.S. government in royalties for gas and oil found on federal and tribal land.

The case is Grynberg v. Homm, 08-CV-000038, District Court, Denver, Colorado.

http://www.denverpost.com/business/ci_7903334