Broker To Hedge Funds Indicted For Late Trading Of Mutual Funds

Attorney General Spitzer today announced the indictment of a stock broker from the Manhattan firm Trautman Wasserman & Co., Inc. for defrauding mutual funds by trading their shares after hours, a practice known as "late trading."

The indictment is the latest action in the Attorney General’s wide-ranging investigation of the mutual fund industry. It charges James A. Wilson, 36, of Manhattan with crimes relating to late trades that he placed on behalf of Trautman Wasserman’s hedge fund clients from late 2000 to September 2003, when the Attorney General’s investigation was announced. To date, the investigation has resulted in guilty pleas by ten individuals in connection with the practice. Late trading is prohibited because it allows favored investors to take advantage of events that had not yet occurred when the market closed for the day.

The 11-count indictment, unsealed today, charges Wilson, with Scheme to Defraud in the First Degree, Falsifying Business Records in the First Degree, and securities fraud in violation of New York State’s Martin Act. Each of these charges is a class "E" felony and carries a maximum penalty of four years in prison. In addition, each count carries a fine of up to $5,000, or double the amount of defendant's gain from the criminal conduct. The defendant was arraigned today by the Hon. James A.Yates of New York County Supreme Court. He was released on $25,000 bail and ordered to remain in the New York tri-state area. The charges are mere allegations, and the defendant is presumed innocent until and unless proven guilty.

The case is being prosecuted by Assistant Attorneys General Harold Wilson and Jeffrey Locke of the Criminal Prosecutions Bureau under the supervision of Criminal Prosecutions Bureau Chief Janet Cohn.


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