The first trade ousted Bank of America broker Ted Sihpol placed for Canary Capital Partners was a late trade, a former hedge fund broker testified today at Sihpol's fraud trial in New York state court, Bloomberg reports.
Noah Lerner, a former Canary broker, said he asked Sihpol to buy $10 million worth of shares in three mutual funds run by BoA's Nations Funds. Lerner said he submitted the request at 4:11 p.m. on May 16, 2001, 11 minutes after the close on the New York Stock Exchange, according to Bloomberg.
"I got to find my technician, and uh, we will make it happen," Sihpol was heard telling Lerner in a taped telephone conversation played in the Manhattan courtroom, Bloomberg reported. Lerner told the court he understood the word "technician" to mean that Sihpol would have someone in the back office stamp order tickets with a time before 4 p.m. The May 16 order tickets were stamped 3:45 p.m., he said.
The prosecution is seeking to demonstrate that Sihpol knew that the trades on behalf of Canary after 4 p.m. were illegal, and that he sought to hide them by falsifying their order tickets.
Sihpol, 37, is accused of helping now-defunct Canary, formerly based in Secaucus, N.J., to engage in the illegal late trading of mutual funds. Sihpol's trial is the first criminal proceeding stemming from New York Attorney General Eliot Spitzer's investigations into the $8.1 trillion mutual fund industry.
Sihpol, indicted last year for larceny, securities fraud and falsifying business records, facilitated Canary's late trading in the Nations Funds and other mutual fund families Spitzer said. Sihpol has pleaded not guilty. As previously reported by Money Management Executive Attorneys for Sihpol have argued that late trading is not explicitly illegal and that their client never intended to commit a crime.