A former Security Trust Co. executive pled guilty to securities fraud charges for allowing hedge fund clients to trade behind the bell, New York State Attorney General Eliot Spitzer said on Tuesday.
Nicole McDermott, 34, former senior vice president of corporate services at the Phoenix-based retirement services company, faces a maximum of four years in prison, Spitzers office said.
She was arrested on November 25, along with Chief Executive Officer Grant Seeger and former President William Kenyon on charges of grand larceny, falsifying business records and securities fraud under New Yorks Martin Act. The trio was charged with stealing millions of dollars in mutual fund shares by engaging in illegal late trading schemes.
At present, it is uncertain how McDermotts guilty plea will impact the outcome of the charges brought against Seeger and Kenyon.
McDermott admitted to directing STC employees to place a bulk of its orders for mutual fund shares on behalf of two hedge fund clients after the market closed, but still receive pre-4 p.m. prices. She also admitted to purposely disguising the illicit trades as orders for one of STCs client retirement plans.
STC, which processes mutual fund trade orders for pension plans and retirement systems, administers $13 billion in assets for about 2,300 retirement plans nationwide. As a result of an enforcement action brought by the U.S. Treasury Department, STC will be dissolved by March 2004. Its current clients will then be transferred to other providers, Spitzers office said.