The Securities and Exchange Commission brought and settled enforcement charges last week against three former executives of Alliance Capital Management who were accused of allowing market timing in the firm's mutual funds.
According to Dow Jones news service, Michael Laughlin, 58, who headed the firm's AllianceBernstein unit, will pay a $325,000 fine. John Carifa, 59, the firm's former president and COO, must pay a $275,000 penalty. Gerald Malone, 50, who managed the Alliance Technology fund and the Alliance Technology hedge fund, will pay $150,000.
The SEC also barred the executives from the business for 12 months and they cannot serve as officers or directors of a mutual fund or advisory firm for three years. The executives did not admit or deny the malfeasance.
Citing an SEC filing, Dow Jones reports that Alliance Capital executives allegedly allowed Las Vegas broker Daniel Calugar to market time the firm's mutual funds in exchange for investing in its hedge funds. The wrongdoing began in 2001 and by 2003 Calugar's stake in some Alliance hedge funds was so large, the SEC determined, they would not survive without him. Litigation against Calugar, who earned an estimated $64 million off the scheme, is pending.
According to the report, Laughlin approved the arrangement, Carifa was aware of it but didn't disclose it, and Malone fretted over it but didn't want to lose Calugar as a client. Attorneys for Laughlin and Carifa said their clients were pleased to reach closure on the issue. Malone's attorney did not immediately return phone calls, Dow Jones said.
Alliance settled with the SEC in December 2003 for $250 million. Including fines it incurred from the New York Attorney General's investigation, Alliance has paid a record $600 million in penalties for market timing. As part of its deal with the New York AG, Alliance has cut its fees by 20% and will keep them frozen at that level until 2008.
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.