McDermott pled guilty in New York State Supreme Court to a violation of New York’s Martin Act. The crime is a felony, punishable by a maximum of four years in prison, New York Attorney General Eliot Spitzer’s office said in a statement.
“In the course of pleading guilty, McDermott admitted to directing [Security Trust] employees to place numerous orders for mutual fund shares on behalf of two hedge fund clients after the 4:00 pm cutoff, but at the pre-4:00 pm price,” Spitzer’s statement said. “She further admitted to employing a variety of methods to disguise the source of the hedge funds’ trades,” the statement added.
McDermott was arrested on November 25 – along with former Chief Executive Grant Seeger and former president William Kenyon – o n charges of grand larceny, falsifying business records and securities fraud under New York’s Martin Act . The trio was charged with stealing millions of dollars worth of mutual fund shares by engaging in unlawful trading practices . I t was not immediately clear how McDermott’s plea might affect Seeger and Keyon’s cases.
The guilty plea comes after Security Trust was formally accused by regulators of helping certain hedge funds make illegal trades in mutual fund shares on November 25. That same day the firm was ordered by the US Treasury Department’s Office of the Comptroller of Currency (OCC) to dissolve by March 31, 2004 (See STC Ex-Execs Hit With Criminal Charges; Regulators Force Dissolution ).
In the OCC’s announcement, the agency said its order requires Security Trust to ensure the trust accounts and retirement plans it administers suffer the least amount of disruption possible. Further, the OCC said that in October, it had forced Security Trust’s controlling shareholder, Capital Management Investors Holdings, Inc., to provide a capital infusion so that the company will have enough money to carry out an orderly corporate dissolution.
Security Trust, based inPhoenix, Arizona, administers $13 billion in retirement and pension assets for about 2,300 retirement plans.