Two Plead Guilty in Mutual Fund Inquiry
The former chief executive and president of an Arizona-based trust company on Tuesday each pleaded guilty to criminal charges in a mutual funds industry investigation.
New York Atty. Gen. Eliot Spitzer accused the former executives of facilitating and participating in fraudulent mutual fund late trading and market timing schemes by a group of related hedge funds.
Grant Seeger, former CEO of Security Trust Co., pleaded guilty to second-degree grand larceny, and to a violation of a state business law. Former Security Trust President William Kenyon pleaded guilty to a felony violation of the same business law, Spitzer said.
Their New York-based attorneys said the plea agreement would result in no prison time, but in probation and each would pay a $50,000 fine.
Seeger’s attorney, Susan Necheles, said the defendants only admitted to setting up accounts through which market-timing trades were done, not conducting the late trades.
“That was going on through every brokerage firm in the country,†she said. “No one thought it was criminal at the time.â€
Market timing -- or rapid in-and-out trades -- is not illegal but is prohibited by many funds because it can disadvantage ordinary shareholders by diluting the value of their shares.
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