Prosecution wraps up case in Sihpol trial
www.mercurynews.com - Associated Press - May 23, 2005
NEW YORK - Prosecutors in the criminal trial of former Bank of America broker Theodore C. Sihpol rested their case on Monday, after examining several final witnesses.
The court heard testimony by executives from two mutual-fund firms early in the day, and prosecutors called as their final witness a Bank of America human relations executive who gave details of Sihpol's work history and his compensation at the bank.
Shon Manasco, the Bank of America executive, indicated that Sihpol's salary at the bank rose sharply during the few years he worked there. The former broker received just under $700,000 during 2003, the final year he worked there, Manasco said. That compared with around $165,000 in 2001, and $500,000 in 2002, Manasco said. Sihpol joined Bank of America late in 2000.
Sihpol, 37, is accused of helping Canary make improper trades in and out of mutual funds. Canary paid $40 million to settle fund-trading charges with regulators, and Bank of America paid hundreds of millions of dollars, leaving Sihpol as the lone individual to face possible criminal sanctions in the matter. If convicted, he faces up to 30 years in prison.
The case hinges on a series of trades Sihpol allegedly helped the hedge fund make after mutual-fund trading closed at 4 p.m. Trading after hours, a practice known as late trading, can allow a privileged group of investors to make a profit not available to other shareholders of a mutual fund. Traders essentially make investments at old prices based on new information. Late traders are able to profit from events - for example, a positive corporate earnings statement - that occur after the market closes.
Ordinary investors in Nations Funds Trust, Pimco Funds, MFS Funds, the Janus Investment Fund, the Alger Fund and the RS Investment Trust were defrauded of millions of dollars as a result of the trades, according to New York Attorney General Eliot Spitzer, whose office brought the charges.
Defense lawyers have argued that Sihpol was a junior broker who wasn't well versed in mutual-fund trading, and who cleared any new or unknown procedures through his bosses.
On Monday, Manasco told prosecutor Stephen Antignani that Sihpol became licensed to buy and sell securities in 1994, and worked at a number of financial firms, including Dean Witter, Lehman Bros. and CIBC, before starting work at Bank of America in late 2000.
The Sihpol trial, in state supreme court, is expected to last another three or four weeks.