Robert A. Berlacher, Lancaster Investment Partners, L.P., Northwood Capital Partners, L.P., Cabernet Partners, L.P., Chardonnay Partners, L.P., Insignia Partners, L.P., VFT Special Ventures, Ltd., LIP Advisors, LLC, NCP Advisors, LLC, and RAB Investment Company, LLC

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20278 / September 13, 2007

SEC v. Robert A. Berlacher, Lancaster Investment Partners, L.P., Northwood Capital Partners, L.P., Cabernet Partners, L.P., Chardonnay Partners, L.P., Insignia Partners, L.P., VFT Special Ventures, Ltd., LIP Advisors, LLC, NCP Advisors, LLC, and RAB Investment Company, LLC, Civil Action No. 07-cv-3800 (ER)

SEC Files Fraud Charges Against Hedge Fund Manager Robert A. Berlacher and the Lancaster Hedge Funds for Engaging in Illegal "Pipe" Trading Scheme and Insider Trading

The Securities and Exchange Commission filed securities fraud and related charges today against Robert A. Berlacher, Lancaster Investment Partners, L.P., Northwood Capital Partners, L.P., Cabernet Partners, L.P., Chardonnay Partners, L.P., Insignia Partners, L.P., VFT Special Ventures, Ltd., LIP Advisors, LLC, NCP Advisors, LLC, and RAB Investment Company, LLC (collectively, "Lancaster") in the U.S. District Court for the Eastern District of Pennsylvania. The Commission's complaint alleges that the defendants collectively perpetrated an illegal trading scheme to evade the registration requirements of the federal securities laws in connection with at least ten unregistered securities offerings, which are commonly referred to as "PIPEs" (Private Investments in Public Equities), made materially false representations to the PIPE issuers in connection with those offerings, and engaged in illegal insider trading.

The Commission's complaint alleges that, during the period 2000 through 2005, Berlacher implemented an unlawful trading scheme that enabled Lancaster to improperly realize more than $1.7 million in ill-gotten gains by investing in PIPE offerings without incurring market risk. Specifically, the complaint alleges:

• Berlacher and Lancaster, after learning about a PIPE transaction, sold short the issuer's stock. Once the Commission declared the resale registration statement effective, Berlacher and Lancaster used the PIPE shares to cover the short positions â€" a practice prohibited by the registration provisions of the federal securities laws.
   
• To avoid detection and regulatory scrutiny, Berlacher and Lancaster employed a variety of deceptive trading techniques, including wash sales, matched orders, and pre-arranged trades, to make it appear that they were covering their short sales with open market shares, when, in fact, Berlacher and Lancaster were on both sides of the transactions and were covering with their PIPE shares.
   
• In each of the transactions, Berlacher and Lancaster made materially false representations to the PIPE issuers to induce them to sell securities to Lancaster. As a precondition of participation in a PIPE, Berlacher and Lancaster had to represent that they would not sell, transfer or dispose of the PIPE shares other than in compliance with the registration provisions of the Securities Act of 1933. This representation was material to the PIPE issuers, who, as the stock purchase agreements made clear, relied on the investors' representations in order to qualify for an exemption from the registration requirements for their private offering. At the time defendants learned about the PIPE, however, they intended to distribute the restricted PIPE securities in violation of the registration provisions of the Securities Act.
   
• On at least one occasion, Berlacher and Lancaster engaged in illegal insider trading by selling short the securities of a certain PIPE issuer prior to the public announcement of the PIPE, while using nonpublic information they received when being solicited to invest in the PIPE. Berlacher and Lancaster engaged in this conduct notwithstanding their agreement to keep information about the PIPE confidential and/or to refrain from trading or discussing the offering prior to the public announcement of the PIPE.

By engaging in the foregoing conduct, the complaint alleges that defendants violated the registration provisions of the Securities Act (Sections 5(a), 5(b), and 5(c)) and the antifraud provisions of both the Securities Act (Section 17(a)) and the Securities Exchange Act of 1934 (Section 10(b) and Rule 10b-5 thereunder). The Commission's complaint seeks to permanently enjoin defendants from future violations of the applicable provisions of the federal securities laws, disgorgement of ill-gotten gains (with prejudgment interest thereon), and civil penalties.

The Commission's investigation is continuing.

SEC Complaint in this matter