US: Ex-Broker Reaches Settlement With S.E.C. on Fund Trading

Publisher Name: 
The New York Times

A former broker with the Bank of America Corporation who was acquitted in June on 29 of 33 criminal charges linked to improper mutual fund trading reached a separate settlement with the Securities and Exchange Commission today.

The broker, Theodore C. Sihpol III, agreed to pay $200,000 and leave the securities industries for five years to settle the S.E.C. civil complaint without admitting or denying the allegations, the commission said today.

In the criminal case, Mr. Sihpol had been accused of enabling a hedge fund manager, Edward J. Stern, to make improper fund trades. The acquittal on most of the counts was a rare legal defeat for the New York State attorney general, Eliot Spitzer, who brought the case.

The Sihpol case was an unusual instance of Mr. Spitzer's going to trial against an executive. In most of his Wall Street cases, Mr. Spitzer has sought to settle in return for commitments by companies and individuals to pay tens of millions of dollars and change industry practices. In the mutual fund investigation alone, companies have agreed to pay about $3 billion worth of fines, restitution and fee reductions to investors harmed by the trading.

The S.E.C. filed a civil suit against Mr. Sihpol two years ago.

Mr. Spitzer's office said in July that it would not drop the four remaining counts on which jurors in the criminal case could not agree. But a spokesman said at the time that Mr. Spitzer would revisit the matter once the S.E.C. case was resolved.
C. Evan Stewart, a lawyer for Mr. Sihpol and a partner in the firm of Brown Raysman Millstein Felder & Steiner, declined to comment on Tuesday.

Spokesmen for Mr. Spitzer also would not comment yesterday. A meeting is scheduled for Oct. 20 before Justice James A. Yates in State Supreme Court in Manhattan to determine the status of the outstanding criminal charges.

Both regulators accused Mr. Sihpol of enabling Mr. Stern's hedge fund, Canary Capital Partners, to trade in and out of mutual funds after the market had closed but at an earlier price. Mr. Stern reached a settlement with Mr. Spitzer in 2003 in which he admitted no wrongdoing but paid $40 million in penalties and restitution. Even if the New York attorney general's suits against Mr. Sihpol are resolved, he remains a defendant in civil suits. That litigation was set aside pending resolution of the regulators' accusations.

Vikas Bajaj contributed reporting for this article.

AMP Section Name:Corruption
  • 186 Financial Services, Insurance and Banking