Ex-Bond Trader Ordered to Pay $8.4 Million

Joseph Jett, a former Kidder, Peabody & Co. bond trader accused of creating $350 million in phantom trading profits, was ordered by an administrative law judge to repay $8.21 million in bonuses and pay a $200,000 fine. The decision by a Securities and Exchange Commission administrative law judge, issued more than two years after a hearing in the high-profile case, found Jett liable only in connection with “books and records” violations. Judge Carol Fox Foelak rebuffed SEC allegations of fraud, in which the agency had sought an $11.4-million fine and $11.4 million in restitution. The judge found that Jett, 40, exploited a glitch in Kidder’s software that credited him with illusory profits, which were falsely recorded in the firm’s ledgers and in regulatory reports. Jett did not commit securities fraud because, while Jett appeared to generate multimillion-dollar profits, he did not actually trade any securities, Foelak held. Neither Jett nor his lawyer could be reached for comment.