George W Philipps, former president and owner of Pension Fund Evaluations, Inc., an investment consultancy, pleaded guilty to paying $55,000 in kickbacks to William V Close, a trustee of the International Brotherhood of Teamsters and the Automobile Mechanics Union.
Philipps is accused of giving money to Close, in return for Close directing Fiduciary Management Associates, Inc., an investment manager to the union pension funds, to direct trades for the benefit of Philips’s firm.
Philipps’s company was paid a portion of the commission earned on the trades, in line with a commission-splitting arrangement he had set up with the clearing brokers – commissions that amounted to hundreds of thousands of dollars. Philipps then gave some of the money to Close.
Though Philipps admitted to the charges, he denied that he was using the payments to bribe Close into giving him the pension fund’s business.
“Soft-dollar practices in the securities industry are an area ripe for abuse. Union pension funds and other institutional investors are poorly served when investment managers and consultants put their own interests first in distributing commissions. When commission-splitting involves kickbacks to fiduciaries, a questionable practice becomes clearly criminal.” US Attorney Sullivan commented on the case.
Philipps, who will be sentenced in May, faces a maximum of three years in jail time, and a fine of $250,000.
Close, pleaded guilty to receiving kickbacks and to money laundering in June last year. He will be sentenced in March.
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