SEC Complaint Shows Pentagon Chief’s Sharp Tongue

Apr 7 2008 | 2:00am ET

According to the Securities and Exchange Commission, Pentagon Capital Management CEO Lewis Chester is guilty of scheming to defraud U.S. mutual funds. If some of its evidence is to be believed, he’s also guilty of first-degree sexism.

In its claim against Chester and London-based Pentagon, the SEC included several e-mails allegedly sent by the hedge fund chief, and they do not paint a pretty (or innocent) picture. According to the regulator, Chester fired off a missive to a pair of brokers who didn’t want to stick around to place late mutual fund trades for Pentagon, which are illegal under U.S. law.

“We’re sending you some leverage money,” Chester allegedly wrote. “Hopefully, this should stop your endless pathetic, pitiful [sic] moaning that I’ve been subjected to for years… poor souls, working past cookie and milk time… for once in your lives, you can work like real mean and do a proper day’s work. (You really are a bunch of women of the first order).”

In another e-mail, the SEC says Chester made his illicit demands unambiguously.

“I really EXPECT you guys to go out of your way to make sure I get late trading,” the SEC alleges the e-mail read.

And in a 2002 e-mail to brokers, Chester allegedly sought to hide the firm’s mutual fund market-timing activity, which, while not illegal per se, is often banned by mutual fund firms.

“Chaps… I NEVER want to see the words ‘Market Timing’ on any correspondence, e-mail, telephone calls, etc.” he allegedly wrote. “If you want to label what we do with something, call it ‘dynamic asset allocation’, but never market timing!”

Lawyers for Pentagon, which announced it would close in advance of the SEC charges, and Chester say their clients will fight the fraud allegations. As for the charges of bad taste on the part of Chester, he says the macho lambasting was all in good fun, calling the recipients “friends.”

“This is broker banter between people who had got to know each other pretty well,” Chester told The Telegraph newspaper. “The broker was always going on about upping his fees.”

RELATED STORIES

SEC Sues Pentagon For Defrauding Mutual Funds
Pentagon To Close After SEC Files Charges


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