Former head of Canary Capital Partners Edward Stern testified Friday in the criminal trial over the mutual fund trading of former Bank of America broker Theodore Sihpol The Wall Street Journal reports.
During his much-anticipated testimony, Stern said he was uncomfortable putting anything in writing regarding the arrangement his hedge fund had with the bank to trade after the close. He also told the court that he never expressed those concerns to Sihpol nor did he believe that Sihpol had a comprehensive understanding of how mutual fund shares were traded.
Stern acknowledged that the trades gave Canary an edge over long-term shareholders. "In retrospect, it was unfair," Stern testified. Overall, the testimony was consistent with what Sihpol's lawyers have argued previously, that he was not well versed in mutual fund trading and that he ran every decision by his superiors.
Friday's testimony broke 20 months of silence from the maligned Stern, whose firm paid $40 million to settle late-trading allegations with New York State Attorney General Eliot Spitzer. Stern is cooperating with Spitzer, likely as a stipulation of the settlement. Sihpol, 37, faces up to 30 years in jail if found guilty on all counts of fraud.