Former Fred Alger Management Vice Chairman James Connelly was sentenced to one to three years in prison yesterday by the New York Supreme Court for tampering market-timing evidence.

Connelly, who paid $400,000 to the SEC in October to settle allegations, asked employees to destroy e-mails documenting how the firm allowed hedge fund Veras Investment Partners LLP to market time its funds. He also then coached employees on how to answer regulators’ questions in depositions, ruled New York Supreme Court Judge James Yates.

Friends and family wrote more than 72 letters on behalf of the former vice chairman to the judge, who reportedly said, "It’s clear there’s a lot that’s good about you, [but] what you are convicted of is tampering with evidence."

New York Assistant Attorney General Felice Sontupe was quoted as telling the court, "Everyone in the financial industry needs to know that concealing and destroying evidence won’t be tolerated."

The news comes as a serious blow to a firm that lost 70% of its staff in the terrorist attacks of Sept. 11, 2001, including President and CIO David Alger (see MFMN 9/17/01). In the two years since that the firm has struggled to regain its footing, the media has reported that it has made great headway but that a criminal indictment of this nature could tarnish the firm’s reputation.

So far, only two other individuals have pled guilty in the ongoing mutual fund trading scandal, Steven Markowitz, a former Millennium Partners trader, and Nicole McDermott, a former senior executive with Security Trust Corp.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.