BOSTON (AP) — In the latest legal blow to a major mutual fund company, Massachusetts regulators accused the parent company of Franklin Templeton Investments of fraud Wednesday, alleging the firm leta Las Vegas businessman make $45 million worth of improper mutual fund trades in exchange for his $10 million investment in a Franklin hedge fund.
The allegations concern dealings between Franklin and Las Vegas securities broker Daniel Calugar, who had already been accused by the Securities and Exchange Commission of earning $175 million from improper trading in mutual funds managed by Alliance Capital Management and Massachusetts Financial Services.
In a civil complaint filed Wednesday, the Massachusetts Securities Division contended Calugar made a similar deal with Franklin Templeton, the No. 4 mutual fund company with $337 billion assets under management.
The complaint names only San Mateo, Calif.-based Franklin Resources and its subsidiaries as respondents, but says that Calugar’s activities were known to top management, including William Post, who until mid-December was president and chief executive of the northern California region for Templeton/Franklin Investment Services.
“Senior Franklin Templeton executives had knowledge of and furthered the activity and were reluctant to pass up the profits generated by courting multimillion dollar hedge fund clients,” the complaint states.
Franklin, however, released a statement saying the proposal was “unauthorized and rejected by management.”
“Franklin Resources’ first priority is to protect the best interests of our funds’ shareholders and our clients, and we are confident that none of them was harmed by these investments,” the statement said. The company said that previously disclosed discussions with the SEC and other regulators continue. The SEC has not formally charged Franklin with any wrongdoing.
Scott Frewing, an attorney for Calugar, declined to comment.
