2 Ousted Executives to Receive Millions

Gary L. Pilgrim and Harold J. Baxter, who lost their jobs in the industrywide probe of improper mutual fund trading, will get about $69.3 million from Old Mutual, the London-based insurer that bought their firm three years ago.

Old Mutual on Sunday said Pilgrim, 63, and Baxter, 57, will receive $58.3 million from a revenue-sharing agreement negotiated in March 2002. Old Mutual also will pay $11 million for vested equity that Pilgrim and Baxter have in the company they founded, Pilgrim Baxter & Associates of Wayne, Pa.

Pilgrim and Baxter, who made about $400 million in total from selling their mutual fund company to Old Mutual, were forced to step down last week because of trading that fell short of “professional and ethical behavior.” The transactions are being investigated by New York Atty. Gen. Eliot Spitzer as well as the Securities and Exchange Commission.

Last week, Old Mutual said Pilgrim invested in a partnership that made frequent trades in shares of Pilgrim Baxter’s PBHG mutual funds from March 2000 to December 2001, and Baxter was aware of the transactions.

Spitzer, who initiated the investigation of the $7-trillion mutual fund industry, also is pursuing complaints against companies including Alliance Capital Management Holding and Strong Capital Management Inc. for alleged short-term trading that siphoned profits from long-term investors.

In the last two months, more than 40 people have been suspended or fired in the probe, including Putnam Investments former Chief Executive Lawrence Lasser.

Pilgrim and Baxter co-founded their firm in 1982. Today, it oversees about $7 billion for clients, down from $27 billion when stock markets reached record highs in March 2000.

Pilgrim, the son of an Oklahoma oil-field worker, ranked among America’s top-performing mutual fund managers in the early 1990s. Assets of his PBHG Growth Fund reached about $6 billion in 1996.

In 1999, the fund soared 92% -- buoyed by investments in technology-related stocks -- before falling for three straight years, including a 30% drop in 2002.

An internal review of Pilgrim Baxter’s past practices “brought into focus conduct that wasn’t consistent with the highest standards of professional and ethical behavior,” Chief Executive David J. Bullock said last week.

Bullock, who joined the company in July from Aegon’s Transamerica Capital Inc., replaced Baxter as CEO.