Wachovia wired a $3.8 million payment to scandal-tainted Frederick J. O’Meally, a move the former broker claims will untangle his name form accusations of market-timing abuses, according to The New York Times. The payment, a result of NASD arbitration, represents the value of a bonus promised to O’Meally when he was a broker for Prudential Securities, which has since been folded into a joint venture with Wachovia. O’Meally’s bonus was withheld because of questions surrounding his market-timing practices. His system, O’Meally boasted, allowed him to execute “a few hundred trades a minute.” Once funds caught on, they began trying to block his trades. “No one told me to change anything, and no one said I was doing anything wrong,” he said, describing an internal review process he likened to an audit. The process worked for him, too, since he took home about 40% of his $5 million annual production. O’Meally, 48, says that the fact he has been paid by his old firm proves his market-timing practices breached no rules. O’Meally has not received compensation for slander, wrongful termination, or attorney fees, all of which he asked the NASD panel to consider. The case is not closed. In August, Prudentialagreed to pay the Securities and Exchange Commission $600 million as part of a market-timing settlement. The same day, the SEC announced a civil action suit against O’Meally and three other Prudential colleagues, claiming the four’s market timing cost 25 mutual funds a total of $2.5 billion. That investigation is pending, according to David Bergers, who leads the SEC’s Boston Office. “The SEC hasn’t heard my full testimony. Once someone hears the story, we feel confident that they’ll think everything I did was appropriate,” he said. After he was fired, O’Meally told the Times he became depressed, drank, and sought medical attention. He sold off assets to pay legal bills, he said, but retained his home and still managed to have $2 million with which he launched a hedge fund, Kismet Capital Advisors. The Bay Shore, N.Y.-based fund now has $12 million in assets under management. “I like what I’m doing better—owning my own hedge fund instead of being a broker,” he said. 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.
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