L. Douglas Schmidt, the former chief operating officer of hedge fund Durus Capital Management, pleaded guilty Wednesday in U.S. District Court in Bridgeport, Conn., to charges that he manipulated two stocks, which led to a profit of $40 million for Durus, The Wall Street Journal reports. Schmidt also admitted responsibility for filing false statements with the Securities and Exchange Commission,
SEC's civil suit accused Durus, Schmidt and Durus founder Scott R. Sacane of artificially driving up stock prices for two health care companies, Esperion Therapeutics (part of Pfizer) and Aksys Ltd., through undisclosed purchases in 2003. The soaring ascent of the stocks enabled Durus to earn $40 million in performance fees and another $2.9 million in management fees. But when it was revealed that Durus owned 78% of Aksys and 33% Erperion stock, there was a run on the stocks, and their prices plummeted.
Connecticut U.S. Attorney Kevin J. O'Connor said "there is a very good chance additional people will be charged in the future." Schmidt will be sentenced in January.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
