New Stream Execs. Charged With Fraud

Feb 27 2013 | 1:41pm ET

Three executives of collapsed hedge fund New Stream Capital were arrested yesterday and charged with fraud.

Co-owners David Bryson and Bart Gutekunst and former CFO Richard Pereira quietly changed its capital structure in order to head off a redemption by its largest investor, Gottex Fund Management, according to a criminal complaint in Connecticut federal court. The three men gave Gottex, which has not been accused of any wrongdoing, priority in exchange for Gottex's agreement not to pull nearly $300 million.

The three canceled plans to close a fund after Gottex objected, but did not tell other investors—who had already been advised to move their money into new feeder funds—that the older fund would survive and would have priority over the new funds.

"Fearing the loss of their fund's largest investor, these defendants orchestrated a scheme to deceive investors in order to obtain and maintain investments," U.S. Attorney David Fein said. The Securities and Exchange Commission has also sued the three men, who each face up to 20 years in prison.

Lawyers for Bryson and Gutekunst said they would fight the charges. All three men were release on bail yesterday, Bryson and Gutekunst paying $5 billion bonds and Pereira $300,000.

Bryson's sister, Tara, who headed New Stream's investor relations effort and who raised nearly $50 million from investors after the secret structure change, has agreed to settle the SEC lawsuit. Bryson was most recently in the news for avoiding jailtime after police found more than 200 marijuana plants in her house in 2010.

New Stream filed for bankruptcy in 2011.

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