Oct. 25–An ex-Bank of America Corp. broker charged in an ongoing probe of the mutual fund industry is suing the bank over its refusal to pay his legal fees.
Ted Sihpol alleges the Charlotte bank is required to advance him legal fees under Delaware law and the company’s own bylaws, according to a lawsuit filed this week in Delaware Chancery Court.
Sihpol faces larceny and fraud counts in New York state court and a civil action filed by the Securities and Exchange Commission. He is accused of helping New Jersey hedge fund Canary Capital Partners make illegal late trades of Bank of America mutual fund shares, according to court documents filed in September.
The suit is meant to enforce Sihpol’s “contractual rights under Bank of America’s bylaws and Delaware law for the advancement of fees,” said Evan Stewart, one of the lawyers representing Sihpol.
“Mr. Sihpol is facing criminal and civil proceedings arising out of activities he allegedly undertook for the Bank of America, of which he was an officer and employee,” he said.
Bank of America, which has not been charged with wrongdoing, is one of many firms swept up in New York Attorney General Eliot Spitzer’s investigation of the $7 trillion mutual fund industry. The bank has dismissed Sihpol and several other employees named in the probe.
The lawsuit says the bank consulted with Spitzer’s office before deciding last month not to advance Sihpol legal fees.
A Bank of America spokesman told the Observer in September that the bank was paying legal fees for former employees, “subject to the normal provision that if they are subsequently found to have broken the law they have to repay us.”
A bank spokesman declined to comment on Friday. Spitzer’s office also declined comment.
Sihpol’s lawsuit says he has incurred $130,000 in legal expenses so far. His complaint asks the bank to pay his fees and costs.
The expanding mutual fund investigation is looking into allegations that some wealthy investors, aided by fund managers and brokers, were allowed to make illegal or improper trades at the expense of long-term investors.
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