A Federal jury in New York found Stephen Treadway, the former chief executive officer of Pimco Advisors Distributors and the former chairman of the board of the Pimco equity funds, guilty on June 30 of permitting hedge fund Canary Capital Partners to market time the funds, in the Securities and Exchange Commission's civil lawsuit against him. The first trial decision in a market-timing case by regulators, it was held in the United States District Court for the Southern District of New York.

Pimco Advisors allowed Canary to market time $4 billion worth of assets through 108 transactions between February 2002 and April 2003, in exchange for investing in other funds, but Treadway didn't reveal Canary's actions to the board of trustees until New York Attorney General Eliot Spitzer brought his case against Canary in September 2003.

"Investing in a mutual fund is an act of trust in those who manage and invest your money," said Randall Lee, director of the SEC's Los Angeles office. "The evidence in this case showed, and the jury agreed, that defendant Treadway betrayed that trust and defrauded investors by allowing a single wealthy investor to engage in a trading strategy that was denied to ordinary investors."

Treadway has denied the allegations, and his attorney, Alan Levine, told Bloomberg News, "We are very disappointed with the jury's verdict."

Possible penalties and sanctions will be determined at a scheduled hearing this Friday.

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