Millennium to Settle Charges

Hedge fund group Millennium Partners and related entities will pay $180 million to settle government charges of improper mutual fund share trading, authorities said Thursday.

The Securities and Exchange Commission alleged that from 1999 to 2003, the $5-billion hedge fund group and its principals “generated tens of millions of dollars in profits for Millennium by engaging in deceptive market timing.”

Geared to exploiting price inefficiencies in the $8.6-trillion fund industry, market timing has been at the core of more than a dozen mutual fund trading scandals since 2003.

New York Atty. Gen. Eliot Spitzer, whose inquiries began exposing pervasive market timing abuses two years ago, cooperated with the SEC in the probe of Millennium, founded and managed by New York financier Israel Englander.

The SEC said it charged Millennium Partners, two related entities, Englander and executives Terence Feeney, Fred Stone and Kovan Pillai in a settled administrative proceeding.

Millennium neither admitted nor denied any wrongdoing, saying it settled “to put this matter behind us.”

Under the agreement, Millennium will repay $121.4 million in ill-gotten gains. Englander will pay a $30-million fine and two related firms owned by Englander will repay $26.6 million in ill-gotten gains, the SEC said.

A penalty of $2 million will be paid by Feeney, $25,000 by Stone and $150,000 by Pillai, it said.

Market timing is illegal only if a fund publicly forbids it, but then allows selected investors to engage in it at the expense of long-term investors and without full disclosure.

Investigators alleged that Millennium earned more than $100 million from market-timing transactions from 1999 to 2003.