A former executive of Lipper Holdings was indicted Wednesday on charges that he caused the values of two hedge funds to be overstated by hundreds of millions of dollars.<\/p>\n
Edward Strafaci was accused of making the Lipper funds appear far more profitable than they actually were from 1996 to 2002, sticking investors with big losses when they thought they were making money.<\/p>\n
Strafaci, 44, of Colts Neck, N.J., pleaded innocent to all four counts against him, including securities fraud and investment advisory fraud. He was released on $250,000 bail.<\/p>\n
His attorney, Seth Rosenberg, said the indictment ignored how difficult it is to assign prices to derivative securities – financial tools that seek to capitalize on the volatility of other securities.<\/p>\n
“Edward Strafaci has always acted with the highest degree of professionalism and integrity while serving the best interests of investors,” Rosenberg said. “We are confident that he will be fully exonerated.”<\/p>\n
Strafaci was executive vice president and director of fixed income money management at Lipper before resigning early last year. He was in charge of calculating the values of securities held by certain Lipper funds.<\/p>\n
The government said Strafaci’s bonuses were tied to the performance of the funds he helped manage, and the performance was tied to how Strafaci valued the assets in each fund. He made up to $1.15 million in bonuses each year.<\/p>\n
But Strafaci deceptively came up with valuations that were above the securities’ actual price in the market, the federal indictment said, sometimes as much as 20 percent higher than a reasonable value.<\/p>\n
Lipper Holdings later had to report to its investors that its Lipper Convertible Fund was worth $365 million, rather than the $722 million it had reported before Strafaci resigned.<\/p>\n
Another fund tied to Strafaci reported it was 15 percent less valuable than it had originally said.<\/p>\n
The Securities and Exchange Commission filed a related civil suit charging Strafaci with securities fraud and investment advisory fraud.<\/p>\n
Lipper Holdings is separate from Lipper Inc., a mutual fund information and analysis company, which is a subsidiary of financial news and information giant Reuters.<\/p>\n","protected":false},"excerpt":{"rendered":"
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