STC Execs Enter Not Guilty Pleas to Scandal Charges

February 23, 2004 ( -Two former executives of now-defunct Phoenix-based custodian/trustee caught up early on in mutual fund trading scandal have pleaded not guilty to fraud charges

According to news reports, Grant Seeger, Security Trust Company’s (STC) former chief executive, and William Kenyon, its former president, had to enter the pleas in state Supreme Court in downtown Manhattan on a 98-count indictment prepared by New York State Attorney General Eliot Spitzer (See  Spitzer Fund Abuse Probe Pumps Out More SubpoenasSTC Ex-Execs Hit With Criminal Charges; Regulators Force Dissolution ). Charges include grand larceny, falsifying business records and securities fraud.

Paul Flynn, a former managing director at Canadian Imperial Bank of Commerce, who was arraigned on the same indictment and named in 27 counts, likewise pleaded not guilty.

The US Office of the Comptroller of the Currency ordered STC to shut down in November, becoming the first company to be dissolved as part of Spitzer’s eight-month-old fund probe focusing on market timing and late trading. In January, STC, which provided back office and trading services to retirement plans accounts, sold its business and assets to American Stock Transfer & Trust Co (See  NY Firm Set to Buy Security Trust ).

In September, one of funds that did business with STC, Canary Capital Partners LLC, paid $40 million to settle Spitzer’s allegations. Spitzer alleged that STC helped Canary, which is based in New Jersey, make illegal mutual fund trades after the 4 p.m. market close.

The US Securities and Exchange Commission filed civil charges against STC in November, charging that STC facilitated hundreds of after-hours trades in almost 400 mutual funds from May 2000 until July. Seeger and McDermott “repeatedly misrepresented to mutual funds that the hedge funds were a retirement plan account,” the SEC said.