NEW YORK Attorney General Eliot Spitzer has reportedly told Fred Alger Management, which lost 70% of its investment team in the World Trade Center attacks, that he is prepared to file criminalcharges against some of its employees in the mutual funds investigation that is claiming scalps across the industry.
The charges, which would be the third set brought since the investigation began, could be laid as early as today.
The scandal over illegal trading practices, which Spitzer says have cost small investors billions, is rocking the industry.
Bank One, the sixth-biggest US bank, yesterday dismissed two executives in its money management-unit after an internal investigation into trading privileges given to the Canary Capital Partners hedge fund.
Last month, the hedge fund Canary Capital Management and its managers agreed to pay $30 million (18 million) in restitution for profits generated from improper trading, plus a $10 million penalty to settle charges brought by Spitzer.
The hedge fund neither admitted nor denied wrongdoing in the settlement.
Mark Beeson, 45, who oversaw Bank One’s $102 billion mutual fund group, and John AbuNassar, who led the institutional fund business, have left the company, the Chicago-based bank said.
“We regret that Canary was given special treatment,” chief executive Jamie Dimon said in a note to employees posted on the bank’s website. “It should not have happened. We continue to work to determine whether One Group investors were financially harmed by this trading and if they were, we will make full restitution.” Earlier this month a former trader at hedge fund Millennium Partners pleaded guilty to illegal late trading.
Fred Alger Management has also been conducting internal reviews.
Daniel Chung, the company’s president and chief investment officer, has said that a former client may have conducted inappropriate trading in the Alger Fund for a “limited period of time” last year.
He added that three sales employees who may have helped a client trade mutual funds after hours have been suspended.
The company did not name the employees or the client, but said it had appointed an independent auditor to assess whether shareholders were hurt.
No one from Fred Alger Management was available for comment, but the charges would be a blow for the company, trying to rebuild itself after 36 employees, including founder Fred Alger’s brother David, died in the 9.11 attacks.
