Investor Allegedly Tried to Strike ‘Market-Timing’ Deal

Investor Daniel Calugar may have made more money than anyone through improper mutual fund trading, authorities say. The resident of Los Angeles and Las Vegas also tried to strike a market-timing agreement with American Funds, the giant mutual fund organization that’s part of Los Angeles-based Capital Group Cos., court documents show.

Market timing refers to short-term trading activity that can generate huge profits for the “timers” but creates costs borne by all shareholders.

Documents filed by Massachusetts regulators show that a former sales executive for Franklin Resources Inc. of San Mateo approached American Funds officials in 2002, seeking market-timing opportunities on Calugar’s behalf.

Massachusetts officials won’t say what happened next. Capital officials have declined to comment, instead steering a reporter to the American Funds website. There, the company said it was “cooperating fully with all inquiries” but that American Funds “has not had any agreements to allow this type of activity.”

The company reviews unusual trading activity, it said, and sometimes forces investors to leave its funds for improper trading. Last year, it said, the company “turned away approximately $200 million in assets” as a result of this policy.

“Over the years,” the statement added, “we have found a handful of instances involving trading activities by employees that were not appropriate and have addressed those cases. In no case has a portfolio counselor, investment analyst or member of senior management of the American Funds’ investment advisor, Capital Research & Management, or its affiliates, been involved in such trading.”

Calugar and his attorney have declined to comment. In a court filing last week, Calugar sought dismissal of a civil suit brought by the Securities and Exchange Commission stemming from his trading at other fund companies, asserting that he has done nothing wrong.

-- From a Times Staff Writer