Massachusetts Sues Prudential Over Brokers' TradesDec 12, 2003 | Bloomberg News
Prudential Securities was sued by Massachusetts Secretary of the Commonwealth William Galvin for failing to supervise brokers who allegedly engaged in short-term and late trading of mutual-fund shares.
The civil complaint says three former brokers in the firm's Boston office Martin Druffner, Justin Ficken and Skifter Ajro placed more than 1,200 orders, valued at about $162 million, to buy mutual-fund shares or cancel earlier orders after the 4 p.m. stock-market close between January 2001 and August 2003.
Prudential "knowingly furthered a fraudulent scheme perpetrated by its Boston branch employees that included market-timing mutual funds and placing illegal late trades," according to the complaint.
The action follows complaints filed last month by Galvin and the U.S. Securities and Exchange Commission alleging securities fraud by five former Boston brokers and two branch managers.
Druffner, Ficken and Ajro created 62 identities that enabled them to evade fund-company restrictions, Galvin alleges. Still, Prudential maintained an "inadequate supervisory system," according to the complaint.
The former brokers have denied wrongdoing, saying their bosses approved the trades.
"We have not had an opportunity to review the allegations, nor have we seen the evidence that supports the charges," said Bob DeFillippo, a spokesman for Prudential Financial.