Janus Executive Resigns Amid Allegations
Janus Capital Group Inc. on Monday said Richard Garland, chief executive of the company’s international business, resigned amid allegations that the Denver-based money manager was involved in improper mutual fund trading.
Garland, 42, was named in New York Atty. Gen. Eliot Spitzer’s Sept. 3 complaint that initiated the investigation of the fund industry.
The executive wrote e-mails that appeared to promote an agreement allowing hedge fund Canary Capital Partners to conduct short-term trades in some Janus funds based outside of the U.S., according to Spitzer.
Canary settled charges with Spitzer. Janus has not been charged, but Spitzer has said his investigation was continuing.
Janus and Garland decided “it would be best if he left the company,” said Blair Johnson, a company spokesman.
“He was the author of one of the famous e-mails, so clearly he was party to those arrangements,” said Burton Greenwald of the Philadelphia consulting firm B.J. Greenwald Associates.
Janus shares fell 26 cents to $13.24 on the New York Stock Exchange. The company made the announcement after the close of regular trading.
Garland will be replaced by Erich Gerth, who has been with Janus since July. Gerth previously worked at Goldman Sachs Asset Management.
Janus has said that it had agreements with 12 investors to make frequent trades in its U.S. funds, although only four of them were active.
The company also said in a Securities and Exchange Commission filing Wednesday that it had arrangements for some investors to make short-term trades in “offshore funds” that were similar to the agreements the company had for some U.S. funds. Janus didn’t say how many arrangements or investors engaged in so-called market timing and didn’t identify the offshore funds.
Laws governing fund trading outside the U.S. vary, Janus said in the SEC filing. The company said it was working with lawyers outside the U.S., and with offshore distributors, to “develop appropriate guidelines for defining existing and future business practices.”
Garland is the first Janus executive to lose his job in the ongoing investigations, which have cost about 40 people their jobs industrywide.
Spitzer’s complaint quoted e-mails in which Janus executives debated the merits of the market-timing business. When one e-mailer wrote this year that accepting the business would affect Janus managers’ ability to run their funds, Garland defended the practice, the complaint said.
“I have no interest in building a business around market timers, but at the same time I do not want to turn away $10 [million] to $20 million. How big is the [Canary] deal?” Garland wrote.
After learning that Canary considered investing as much as $50 million, Garland approved the arrangement on April 3, according to Spitzer’s complaint. The agreement was never carried out, the complaint said.
Garland joined Janus in 1998 and oversaw sales of Janus World Funds, based in Dublin.
