Empire State Jury Clears Sihpol of Scandal-Related Charges

June 9, 2005 (PLANSPONSOR.com) - In a significant setback for New York Attorney General Eliot Spitzer, a New York jury Thursday acquitted former Bank of America broker Theodore Sihpol III of most of the charges that he aided in the late trading of mutual funds.

A New York Supreme Court jury in Manhattan found Sihpol not guilty on 29 of the 33 counts against him, the New York   Times reported. Jurors were deadlocked on the four remaining counts, and Justice James Yates declared a mistrial, the Times reported.

Sihpol had been accused of enabling hedge fund manager, Edward Stern, to make late trades of mutual funds (See  Ex-BoA Broker Sihpol Indicted in Scandal ). It was a tip about those trades in 2003 that initiated a broad investigation of the mutual fund industry by Spitzer and the Securities and Exchange Commission   (SEC) focusing on market timing, late trading, and certain sales practices.

Sihpol, while a relatively low-level figure, was the first executive to be brought to trial in that investigation and his case was considered the first major courtroom test of   Spitzer’s office in the fund scandal (See  Sihpol Heads to Trial on Improper Fund Trading Charges ).

During the six-week trial, the focus was not on whether Sihpol arranged for Stern to trade after hours, but whether Sihpol was aware that those trades were wrong. Throughout the trial, Sihpol’s lawyers portrayed him as an inexperienced, junior employee of the bank, and argued that other executives at Bank of America were aware of   Stern’s trading arrangements.