Noreen Harrington, a former executive of the Stern Asset Management arm of the Hartz Group, identified herself as the initial whistle-blower in the mutual fund scandal that has ravaged the industry, The New York Times reports.
Harrington said she overheard hedge fund traders boasting about how they were allowed to trade in and out of funds well after the market closed. The hedge fund money they were managing, she said, came from accounts started up by Edward J. Stern.
"There was some chatter about putting trades through at 9 p.m.," Harrington told the newspaper . She said that she realized immediately after her 2001 hire that the hedge fund, Canary Capital, was participating in the illegal trades. Canary has since settled with regulators for $40 million.
''Because of her gutsy move, there will be dramatic reform in a sector that has the life savings of 95 million Americans," said New York Attorney General Elliot Spitzer, who Harrington phoned with the tip last May.
Harrington left the Hartz Group in 2002, citing fundamental differences in thinking with the company. Stern still denies any wrongdoing.