High life ends as fugitive rogue trader held in Italy

Florian Homm, the flamboyant former hedge fund manager who has spent the past five years in hiding, was arrested on Friday in Italy and faces extradition to the US on securities fraud charges.

Italian police arrested Mr Homm, a 53-year-old German who holds degrees from Harvard University, at the Uffizi Gallery in Florence. He is accused of defrauding investors of at least $US200 million ($195.6 million), the FBI said, and the most serious of the four felony charges against him carry maximum sentences of 25 years in prison.

Mr Homm was one of Germany's best-known financiers before he disappeared in 2007 as his portfolio of hedge funds, Absolute Capital Management Holdings, was collapsing. Until then, Mr Homm had been a symbol of predatory capitalism in Germany. In 2004, he bought 26 per cent of Borussia Dortmund, the nearly bankrupt soccer team, and forced management changes.

He seemed to relish his role as a "locust" - the label one German politician gave to buyout firms - appearing on television shows holding a Cuban cigar or posing for photographs at his villa on the Spanish island of Majorca.

Mr Homm has been the target of a civil suit by the US Securities and Exchange Commission, which accused him of manipulating share prices by buying and selling shares among entities he controlled. Last week, prosecutors in Los Angeles filed criminal charges against him.

According to the FBI, Mr Homm earned commissions as a result of trades between a broker in which he owned a stake and the hedge fund. The trades inflated the prices of penny stocks and made Absolute Capital Management look more valuable than it was - a practice known as "portfolio pumping". Mr Homm and people he worked with are accused of earning $US53 million through the scheme.

In a telephone interview in November, Mr Homm acknowledged he had behaved badly and committed many sins. "I've always said I've been a rogue operator in much of my life," he said.

But he said his fund, which at one point had $US2 billion under management, was highly profitable most of the time. The charges against him were based on lies told by former associates.

Mr Homm resigned as the head of Absolute Capital in the middle of the night on September 18, 2007. By his own account, he boarded a private plane in Majorca, his Calvin Klein underwear stuffed with cash, and made his way to Colombia, where he lived under an assumed name.

But Mr Homm said he was never a fugitive. He said he had dropped from view because he wanted to find himself and because some people he had done business with were trying to kill him. He reappeared in November when he gave clandestine interviews to promote a book he wrote, Rogue Financier: The Adventures of an Estranged Capitalist.

The book was intended as a cautionary tale, he said. "The pursuit of happiness is not correlated with the pursuit of money."

He insisted he was no longer the same person who once owned a stake in a Berlin brothel. He said he prayed daily and was devoting his energy to charity work.

Given Mr Homm's flair for drama, it was perhaps fitting that he was arrested at the Uffizi Gallery, famous for an exquisite collection that includes works by Michelangelo, Rubens, Tintoretto and Rembrandt.

At the time, he was accompanied by his former wife and his son, according to the Italian news agency ANSA.