Smith Barney Consultant Named in FleetBoston Action

March 1, 2004 ( - A financial consultant employed by Citigroup Inc.'s Smith Barney unit arranged a $20-million deal to market time mutual funds, state and federal authorities have said.

The complaint filed last week charging two mutual fund units of FleetBoston Financial Corp with civil securities fraud named Boston-based consultant Salvatore Giacalone among nine investment advisers, hedge funds, brokers, and individual investors, Reuters reported (See   FleetBoston Faces SEC, Spitzer’s Lawsuit Wrath ). The only one of the nine employed by a major financial firm, Giacalone has not been charged with wrongdoing, although regulators say the investigation is ongoing.

According to both complaints, Giacalone reached a deal in 2000 with the Newport Tiger Fund, which was then owned by Liberty Financial Group. Under the terms, Giacalone agreed to make long-term investments of $5 million – so-called sticky assets – in exchange for the right to use $15 million to market time, according to the complaints.

Last October Smith Barney fired five employees as the result of an internal probe for violations of late trading and market timing rules. At the time CEO Sallie Krawcheck said that the firm would continue its internal review.

All of the nine parties are alleged to have cut deals with Columbia Management Advisors Inc. and Columbia Funds Distributor Inc., two FleetBoston units that allowed them to improperly market time millions of dollars. In addition to Giacalone, the parties include:

  • New Jersey hedge fund Canary Capital Partners
  • West Coast investor Daniel Calugar
  • San Francisco hedge fund Ilytat LP
  • investment adviser D.R. Loeser
  • Great Neck, New York-based investment adviser Signalert
  • investor Alan Waldbaum
  • investment adviser Tandem Financial
  • Illinois hedge fund manager Ritchie Capital Management.