The New York State Attorney Generals office released the indictment of former Bank of America broker Theodore C. Sihpol, III yesterday, detailing the 40 counts of fraud, grand larceny, violation of general business and falsifying business records, he is facing.
Eliot Spitzers office has accused Sihpol of not only entering into a market timing agreement with hedge fund Canary Capital, but also arranging for an electronic trading platform to be provided to Canary to allow the firm to place trades as late as 8:30 P.M.
Earlier, Canary was allowed to make investment decisions past the bell by placing what appeared to be orders before the close, but only confirming or canceling them after the market close, Spitzers office claims.
Included in the indictment are the transcripts of three phone conversations between Sihpol and Canary representatives. In one correspondence, dated March 2003, Sihpol asks a Canary employee if he knows the "right answer" if he is asked whether Canary makes all its investment decisions before 4 oclock.
Sihpol said he was prompted to broach the subject with Canary because one of his superiors noticed the system set up allowed the hedge fund to execute trades up until 5:30 PM. He said his superior was concerned that BoA could have "real problems" if Canary is audited and it "comes out" the firm made investment decisions after the market closes and BoA failed to conduct its due diligence as their broker.
A spokeswoman for Spitzers office said that Sihpol faces potential fines of $5,000 for each count. As for prison time, the grand larceny charges carry up to 25 years behind bears, while the other counts can land Sihpol in jail for four years each.
C. Evan Stewart, an attorney representing Sihpol, said his client will plead not guilty to charges and that Sihpol does not believe he engaged in criminal conduct.