Sunday, 1 March 2015
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Sep 8 2006 | 12:00am ET
As the days get shorter and regulators prepare for whatever scam or fraud may hit in the fall, prosecutors, lawyers and defendants have been putting a bow on several long-running legal dramas.
After three years, the improper mutual fund trading scandal seems to be on its last embers. The Securities and Exchange Commission this week said it would not appeal the dismissal of its case against Paul Flynn, marking the end on his two-year odyssey through the halls of justice.
Or, in this case, perhaps, injustice: Flynn was arrested in February 2004 and charged criminally by New York Attorney General Eliot Spitzer and civilly by the SEC for his alleged role in helping a pair of hedge funds late-trade mutual fund shares. But in November, Spitzer dropped the charges, saying he found two officials from electronic trading firm Security Trust Co. “significantly more morally culpable.” Then, last month, Administrative Law Judge Robert Mahony tossed the SEC’s case, saying Flynn had no idea he was abetting improper trading. Flynn’s attorney told the Journal News of White Plains, N.Y., that Flynn will seek to get back his job as managing director of equity investments at the Canadian Imperial Bank of Commerce.
Prudential Financial was not so lucky. The U.S. Justice Department thought it was morally culpable in the actions of a pair of its Boston brokers, who pleaded guilty to fraud charges last year for using fake identities to skirt mutual fund trading controls. Pru, bidding to avoid a criminal prosecution of its own, has agreed to pay $600 million to make the problem go away.
Two other huge hedge fund-related scandals are also drawing toward their endgames. Samuel Israel, one of the brains behind the Bayou Group scandal, has had his status as an associated person with the Commodity Futures Trading Commission revoked following his guilty plea last September. Israel actually requested the disqualification, probably figuring he won’t be needing it. He and his partner, Daniel Marino, are set for sentencing in White Plains in January. Both men face upwards of 30 years in prison.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…