3 Execs Enter Pleas in Fund Probe
Three former executives pleaded not guilty Monday to charges filed as part of New York Atty. Gen. Eliot Spitzer’s probe of the mutual fund industry.
Grant Seeger and William Kenyon, the former chief executive and former president, respectively, of Phoenix-based pension fund services company Security Trust Co., pleaded not guilty to 98 counts of grand larceny, securities fraud, falsifying documents and other charges, according to the New York attorney general’s office.
Paul Flynn, a former managing director at Canadian Imperial Holdings Inc., a unit of Canadian Imperial Bank of Commerce, pleaded not guilty to 27 counts.
The arraignments in a Manhattan criminal court were part of a broadening investigation into improper mutual fund trades.
Spitzer’s office, the Securities and Exchange Commission and the Treasury Department’s Office of the Comptroller of the Currency charged in November that Security Trust had helped hedge funds make illegal trades. Regulators ordered that the company be shut down.
Seeger’s attorney, Frederick Hafetz, said, “We will go to trial and are confident he will be vindicated at trial.”
Gerald Shargel, the attorney for Kenyon, was not immediately reachable.
David Gendelman, the attorney for Flynn, declined to comment.
Flynn was charged last month with helping various hedge funds structure derivatives and secure financing to increase the size of their trades.
In December Nicole McDermott, formerly Security Trust’s senior vice president, pleaded guilty to a felony. McDermott is facing as many as four years in prison.
Regulators are investigating instances of late trading, an illegal practice in which mutual fund shares are traded after the market’s close at that day’s price instead of the next day’s.
The probe is also focused on market timing, or rapid-fire trades in and out of mutual funds. Market timing is not illegal, but Spitzer has said it could be a violation of fiduciary duty because the policies of most fund companies prohibit the practice.