A New York State Supreme Court grand jury on Monday indicted Theodore Sihpol III, on 40 counts of fraud, grand larceny and falsifying statements, according to news reports. He recruited the fund, Canary Capital Partners, to be a Bank of America client, according to New York Attorney General Eliot Spitzer’s 25-page indictment . Canary has been at the center of the probe since it became public last fall.
Sihpol was taken into custody in mid-September and accused of participating in the theft of funds run by Bank of America’s Nations Fund Trust by letting Canary place post-close trades in New York, when mutual funds are valued for the day. That let the hedge fund profit from market-moving information as much as 24 hours before the shares were valued again – the process known as late trading.
Last month, Charlotte, North Carolina-based Bank of America Corp. agreed to pay $375 million to settle allegations that the bank’s executives allowed improper fund trading (See BofA, Fleet Near Settlement With SEC, Spitzer ).
Sihpol, who stepped down from his Bank of America post a few days before he was arrested, was released on $750,000 bail. Sihpol will be arraigned in state Supreme Court on April 21.
Sihpol started to cultivate Edward Stern, the managing principal of Secaucus New Jersey-based Canary Capital, as a client in an April 2001 visit to the hedge fund’s headquarters, according to Spitzer’s September suit against Canary. Stern asked Sihpol if the bank would allow the fund to time trades and provide financing and clearing services, Spitzer’s suit alleges.