Former hedge fund manager James Fry may be on the verge of a courtroom victory.The Arrowhead Capital Management founder, arrested in July on charges he helped fraudster Thomas Petters cover up his $3.65 billion Ponzi scheme, should not face three charges of lying to the Securities and Exchange Commission, a federal judge has opined. In a report following Fry's request that those charges be dropped, Magistrate Judge Jeffrey Keyes agreed, writing that two perjury counts were based on allegedly false statements, and another because it was based on multiple versions of the same statement.
The final decision on the counts lies with U.S. District Judge Richard Kyle, set to preside over Fry's trial in May.
Even if Kyle goes along with Keyes' report, Fry still faces five counts of securities fraud and four counts of mail fraud. According to prosecutors, Fry lied to investors in his Minnetonka, Minn.-based hedge funds about Petters' default on notes owned by Arrowhead, and failed to tell them about the criminal past of Frank Vennes, Petters' chief fundraiser who is accused of helping Fry cover up the default.