The German fugitive hedge fund manager who more than five years ago fled the Spanish island of Mallorca with $500,000 hidden in his underwear and luggage faces U.S. charges after his arrest at the Uffizi Gallery in Florence.

Florian Homm, 53, was taken into custody by Italian police at 12:30 p.m. on March 8 at the world-famous museum that houses Sandro Botticelli’s Birth of Venus and Leonardo da Vinci’s Annunciation.

The arrest, by Homm’s own account as well as that of U.S. prosecutors, followed his 2007 decision to leave behind a life of wealth, castles and “bimbos.” During his escape, he held a Liberian diplomatic passport as well as German and Irish passports, according to the Federal Bureau of Investigation.

Homm is accused in a criminal complaint filed March 6 in federal court in Los Angeles of defrauding investors in hedge funds he controlled, causing $200 million in losses. He is charged with four counts of conspiracy, wire fraud and securities fraud. He faces as long as 75 years in prison if convicted on all counts.

The founder and former chief investment officer of Absolute Capital Management Holdings Ltd. is accused of “cross trading” billions of shares of penny stocks between the company’s funds to boost the value of the otherwise illiquid securities.

The trades, through a Los Angeles-based broker-dealer that Homm co-owned, generated fees for Homm and Absolute Capital and also inflated the price of Absolute Capital’s shares, U.S. prosecutors said. Homm “dumped” his shares and resigned from Absolute Capital on Sept. 18, 2007, “in the middle of the night,” according to the U.S.

$53 Million

Homm and his co-conspirators made more than $53 million from the scheme, prosecutors said. Thom Mrozek, a spokesman for the U.S. Attorney’s Office in Los Angeles, didn’t return phone and e-mail messages yesterday seeking comment on the case.

Adam Kravitz, a Miami lawyer who represents Homm in a lawsuit brought by the U.S. Securities and Exchange Commission, declined to comment on the criminal charges.

Beginning in about 2003, Absolute Capital was the investment manager for 16 funds based in the Cayman Islands, according to an affidavit by a FBI agent filed in support of the arrest warrant. Absolute Capital managed as much as $2.1 billion in September 2007, when Homm quit and ran from Mallorca, leaving behind a portfolio of hard-to-trade assets.