For Release: February 20, 2008
CFTC Files Second Amended Complaint Charging Philip J. Baker, Lake Shore Asset Management Limited, Lake Shore Group, and Several Commodity Pools with Fraud
CFTC Alleges that the Lake Shore Common Enterprise Fraudulently Solicited At Least $300 Million and Misappropriated More Than $11 Million
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) filed a second amended complaint in its continuing litigation against Philip J. Baker and the companies he controlled, Lake Shore Asset Management Limited (LSAM) and the Lake Shore Group of Companies Inc., Ltd. (Lake Shore Group) – collectively, the Lake Shore Common Enterprise. The second amended complaint was filed on February 19, 2008, in the U.S. District Court in Chicago. (See CFTC Press Releases 5349-07, June 28, 2007; 5351-07, July 5, 2007; 5353-07, July 17, 2007; and 5383-07, September 13, 2007.)
The second amended complaint adds charges against several additional entities, alleging that Baker, LSAM, the Lake Shore Group, Hanford Investments Ltd. (Hanford), and at least twelve commodity pools controlled by Baker, operated as a common enterprise under variations of the name Lake Shore Alternative Financial Asset Fund. The complaint alleges the defendants defrauded hundreds of commodity pool participants who collectively invested at least $300 million to trade commodity futures contracts on U.S. futures markets.
Specifically, the second amended complaint alleges that the Lake Shore Common Enterprise fraudulently solicited pool participants by misrepresenting the profits and losses incurred by the commodity pools and distributing false account statements to participants showing they were earning substantial profits when, in fact, the trading accounts in the name of the pools collectively lost approximately $37.5 million from February 2002 through June 2007. The second amended complaint requests that Hanford and the commodity pools be required to repay all the pool participant funds they received because they have no legitimate interest in the funds.
In addition, the second amended complaint charges that the defendants siphoned millions of dollars from the fraud for their benefit, alleging that the Lake Shore Common Enterprise misappropriated pool participants’ funds by improperly charging incentive fees, by fraudulently transferring more than $10 million in profits from accounts maintained at Sentinel Management Group, Inc. (Sentinel) to an account owned by Hanford, and by transferring more than $1 million from pool accounts at Sentinel to Anglo International Associates Ltd. (Anglo) for purported operating and administrative expenses. As alleged, Baker benefited from these transfers because he controls Hanford and Anglo. The second amended complaint requests that Anglo and Hanford be required to repay all the profits and fees they received on the ground that they have no legitimate interest in them.
Like the CFTC’s original complaint filed against LSAM on June 26, 2007, the second amended complaint also charges the Lake Shore Common Enterprise with violating the record keeping and inspection requirements of the Commodity Exchange Act and CFTC regulations.
In its continuing litigation against the Lake Shore Common Enterprise, the CFTC is seeking permanent injunctive relief, a return of funds to defrauded pool participants, the repayment of ill-gotten gains, and civil monetary penalties.
The CFTC’s Enforcement Division appreciates the assistance of its Office of Chief Counsel’s staff, Elizabeth Padgett, and the United Kingdom’s Financial Services Authority in this matter.
The following CFTC Division of Enforcement staff are responsible for this case: Diane M. Romaniuk, Ava M. Gould, Mary E. Spear, Don Nash, Scott R. Williamson, Rosemary Hollinger and Richard B. Wagner.
Last Updated: February 20, 2008