Dec. 3–Battered by three months of accusations against him and his company, Richard S. Strong resigned Tuesday as Strong Financial Corp.’s top executive.

Strong, 61, also resigned from the boards of Strong Financial and the Strong mutual funds and said he would “take steps” to divest himself of voting control of the firm. Strong owns about 90 percent of the company.

“For the past 29 years, this firm and what it represents have meant everything to me and I have always tried to act in the best interests of shareholders,” Strong said in a statement. “After weeks of intense reflection, I have come to realize that the best way for Strong Financial to pursue its promising future is for me to step down.”

Kenneth J. Wessels, who founded a Minneapolis investment banking firm that was acquired by Dain Rauscher Inc. in 1998, will replace Strong as chairman and chief executive of the Menomonee Falls company.

Strong’s troubles began on Sept. 3, when New York Attorney General Eliot Spitzer first implicated Strong Capital Management Inc. for giving a New Jersey hedge fund special opportunities other shareholders didn’t have to trade in certain Strong funds.

The company’s problems intensified on Oct. 29, when Spitzer’s office said it planned to take action against Strong personally, based on allegations of improper short-term trading of his company’s mutual funds, prompting Strong to resign as chairman of the firm’s mutual fund board.

Spitzer has not charged Strong or his firm with anything to date. But his wide-ranging probe of the mutual fund industry has resulted in charges against several companies and prompted the departures of top executives at Pilgrim Baxter & Associates, Putnam Investments, Securities Trust — and now Strong.

A spokesman for Spitzer’s office had no comment on Strong’s resignation other than to say it would not affect the investigation.

The resignation — and Wessels’ investment banking background — immediately prompted speculation that Strong would end up selling the firm he has been building so ardently and single-mindedly since 1974. Today, the company manages 66 mutual funds, has $43 billion in assets and employs 1,300 people.

But the language the company used in its news release suggests Strong could conceivably give up his voting rights but still influence if or when the company is sold. Strong, for instance, could keep his economic interest while putting his shares of Strong Financial in a trust that gave voting control to trustees he designated.

“This move is hardly a definitive statement he’s gone,” said Don Phillips, president of Morningstar Inc., Chicago. “It almost sounds like they want to leave the door open so if Dick Strong exonerates himself, he can step back in.”

Strong is exploring various options for achieving the divestiture with his advisers, company spokeswoman Stephanie Truog said, but declined to comment further.

Strong’s resignation was something that needed to happen for the firm to go forward on a day-to-day basis, said Roy Weitz, publisher of Fund-Alarm.com, an online newsletter that offers advice on which mutual funds to sell. But Strong should have determined how to go about the divestiture before announcing his resignation, Weitz said.

The resignation “has pluses, minuses and obfuscation — like everything he’s done since Sept. 3,” Weitz said. “You tie down all the loose ends, and you don’t leave that open. That’s just asking for a charge of clouding the issue.”

Strong employees were informed of Richard Strong’s resignation at an all-company meeting. The mood was somber among those who stopped to talk to a reporter as they left work Tuesday evening.

“It’s a sad turn of events,” said one employee who declined to give a name.

Late into the evening, past the trees glowing with holiday lights in the lobby, employees manned the phones at the company’s 24-hour call center.

“It’s a sad day, that’s all I can say,” said receptionist Colleen Nodle.

Some suggest Strong’s resignation was prompted by the discussions Strong and his firm are having with Spitzer, the Securities and Exchange Commission and the Wisconsin Department of Financial Institutions.

“There may have been a lot of maneuvering between Spitzer’s office and Strong himself as to what the next step would be,” said state Treasurer Jack C. Voight. “Dick Strong doesn’t do things like this very easily. To save the company and the jobs in Wisconsin, he was willing to step aside.”

Another source familiar with Strong’s discussions with federal and state agencies said Strong’s resignation “was not a bargaining chip.”

Wessels, Strong’s new chairman and chief executive, co-founded the Minneapolis investment bank Wessels, Arnold & Henderson and served as its chief executive officer until it was acquired by Dain Rauscher. Before that, he was an executive vice president at Piper Jaffray and a partner at the San Francisco investment bank Robertson Stevens.

Richard T. Weiss, a longtime Strong portfolio manager and one of just two Strong Financial board members with Strong, will lead Strong’s investment department, though he will not become chief investment officer.

Strong Financial’s board will consist of Wessels, Weiss and Frank P. Doyle, a former executive vice president of General Electric Co. who has in the past been a consultant to the company.

Wessels got the top job over the three members of the firm’s Office of the CEO despite the fact that when that group was formed in 1998 Strong called it “an important step to develop our future leadership talent.”

Some wondered if Wessels was the right choice to lead Strong through its problems, given his lack of mutual fund industry experience.

“The cultural issues are important and there’s no indication Wessels even has notion of what type of culture is appropriate and that he can institute it,” Weitz said.

Weitz said Strong’s resignation will help the firm staunch the outflows from its funds.

“At least in the foreseeable future, it takes away a major reason for fiduciaries to leave because they don’t have to worry about the threat he is going to be sanctioned or barred,” while still running the company, Weitz said.

Others, though, who have already pulled funds from Strong said Richard Strong’s resignation likely wouldn’t have affected their decision.

“I can’t speak for the board, but it likely would not have changed my recommendations to the board,” said Michael Parker, executive director of the Oregon 529 College Savings Network.

“I don’t want our investors subject to a firm that’s not completely focused — and how could you be when you’ve got this whole thing swirling around you.”

While remaining Strong fund shareholders are deciding whether to stay or go, many believe Strong himself will be weighing how the next chapter in his firm’s history will be written. Some, like Phillips, say they can’t imagine him selling unless he absolutely has to.

“It’s got to be incredibly difficult for him not to be involved in what is his life’s work,” Phillips said. “Knowing Dick Strong and the passion he has for what he’s created, it would be like having a limb severed to have it gone.”

Tom Held, reporting from Menomonee Falls, and Avrum D. Lank of the Journal Sentinel staff and the Associated Press contributed to this report.

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