Former Bank of America Corp. broker Ted Sihpol was indicted Monday by a New York grand jury, accused of helping a New Jersey hedge fund make improper mutual fund trades.
In a 40-count indictment, the grand jury accused Sihpol, 36, of fraud, larceny and falsifying records. New York Attorney General Eliot Spitzer alleged that Sihpol assisted Canary Capital Partners in making mutual funds trades after the 4 p.m. market close.
Sihpol is the only current or former Bank of America employee to face criminal charges in Spitzer’s investigation of the $7.5 trillion mutual fund industry.
The Charlotte-based bank and merger partner FleetBoston Financial Corp. reached a $675 million settlement last month with Spitzer and federal regulators.
Sihpol will plead not guilty, his attorney Evan Stewart said. “Mr. Sihpol does not believe he engaged in criminal conduct,” Stewart said.
Spitzer filed larceny and fraud charges against Sihpol in September. The Securities and Exchange Commission also has filed a civil enforcement action against him, alleging violations of federal securities laws.
Sihpol recruited Canary as a client in the spring of 2001, according to the 25-page indictment.
At Canary’s request, Sihpol arranged for the hedge fund to make frequent trades in and out of Nations Funds mutual funds, the indictment states.
This practice, known as market timing, is not illegal, but is banned by many funds because it can hurt long-term investors.
Sihpol, according to the indictment, also arranged to provide Canary an electronic trading platform that allowed the hedge fund to enter mutual fund trades as late as 8:30 p.m., but at mutual fund prices set at 4 p.m.
Spitzer has likened this practice, known as late-trading, to betting on yesterday’s horse race. Regulators have said that late-trading is illegal, but Sihpol’s attorney has argued that the regulations are unclear.
Canary’s trading activity occurred between May 2001 and July 2003, the indictment states. The hedge fund agreed in September to a $40 million settlement with Spitzer.
Sihpol will be arraigned in New York State Supreme Court on April 21.
Need Legal Help?
New York City, Long Island, New Jersey, and Florida
Our New York personal injury lawyers are here to help you when you need it the most.