A WITNESS in the US fraud trial of a former Derby County investor has told how he felt pressured to overvalue the share price of a solar panel firm in order to generate greater returns.
The Virginia court has heard that L. Bruce Glasser was hired to head up the New York investment banking arm of MICG Investment Management – a company led by former Rams investor Jeffrey Martinovich.
Mr Glasser convinced Martinovich to invest in a New Jersey company called EPV Solar.
He told the court that Martinovich pressured him to get inflated estimates of the value of the struggling solar panel manufacturer, in which MICG's hedge fund – MICG Venture Strategies – bought a substantial stake.
An initial estimate put EPV Solar's share price at $1.80, well above the $1.15-a-share MICG paid for them.
Mr Glasser told Martinovich that the share price would translate to between $300,000 and $400,000 in performance fees for MICG.
But Mr Glasser told the court that Martinovich went on to pressure him to come up with higher estimates, which he felt overstated the value of EPV Solar. He said that EPV had begun losing revenue at an alarming rate and was unable to secure new capital after the onset of the financial crisis in late 2008.
Mr Glasser told the court: "I felt it shouldn't be higher intellectually because there was no reason for the company to be valued at a higher value. I wasn't going to question (Martinovich's) methodology.
"I did not initiate any of the changes. They were initiated by Jeff for me to make."
EPV ended up declaring bankruptcy in February 2010.
But Martinovich's defence attorney, James Broccoletti, said that Mr Glasser had a motive to seek out the ballooning valuations without prodding from Martinovich, noting that, since starting at MICG in 2006, Glasser had brought little business to the company aside from EPV.
MICG Investment Management, of which Martinovich was chief executive, was one of the companies that helped finance the takeover of the Rams in January 2008.
MICG put $5 million towards the takeover by General Sports and Entertainment.
The deal saw MICG buy 50,000 shares in General Sports Derby, the firm set up to run the club, giving MICG a stake of less than 10%.
Martinovich, 47, is facing 26 counts of fraud involving the mismanagement of the MICG Venture Strategies hedge fund.
If found guilty, Martinovich could face a total jail sentence of 520 years, as each fraud charge carries a 20-year jail sentence.
Derby County has previously said the legal action against Martinovich would have no impact on the club and that, although MICG once had a small shareholding, Martinovich was not an individual shareholder.
The case continues.
