New York Attorney General Eliot Spitzer dropped criminal charges against Theodore Sihpol III, after the former Bank of America broker settled...
New York Attorney General Eliot Spitzer dropped criminal charges against Theodore Sihpol III, after the former Bank of America broker settled a civil suit with the Securities and Exchange Commission (SEC) over late trades.
Sihpol, 38, agreed to pay $200,000 and be barred from the securities industry for five years, without admitting or denying wrongdoing, the SEC announced this morning. A few hours later, a New York judge dismissed four criminal counts against Sihpol at the attorney general’s request.
Sihpol was acquitted on most charges against him this summer and got a mistrial on the rest, handing Spitzer his first defeat in a three-year investigation of the financial industry. Spitzer resolved most cases by settlement.
“The bottom line is that he was acquitted on almost everything,” Mark Winston, a lawyer and former federal prosecutor who tried securities cases. “Spitzer’s office took a strong stand, but now with the SEC settlement maybe they said, ‘Let’s cut our losses and move on.’ “
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Both the criminal and civil actions grew out of investigations into late trading of mutual funds.
The jury earlier this year found the former broker not guilty on 29 of 33 charges, deadlocking on the rest. Sihpol still faced the possibility of being retried on the last four.
At a hearing after yesterday’s SEC announcement, Assistant Attorney General Harold Wilson asked Justice James Yates of New York State Supreme Court to dismiss the charges, and the request was granted.
The jury’s decisions in the summer and the terms of the SEC settlement mean “the interests of justice have been served and further proceedings in this matter are unnecessary,” Wilson told the judge.
“I now recognize and regret that my conduct helped give Canary Capital an unfair trading advantage over other Bank of America mutual-fund shareholders,” Sihpol told Yates, referring to the hedge fund he helped with his trading.
Evan Stewart, a lawyer for Sihpol, said that Sihpol’s statement didn’t amount to an admission of wrongdoing.
“Today Ted Sihpol resolved all of his criminal and civil regulatory issues with the government,” said Stewart, of Brown Raysman Millstein Felder & Steiner in New York.
“I’m evaluating all my options,” Sihpol said after the hearing. “I feel great. I’m very thankful for my family, my wife and obviously my legal team for supporting me.”
Spitzer said in June after the criminal trial that he would retry Sihpol if the broker didn’t admit wrongdoing and accept sanctions in a settlement with the SEC. Sihpol, if convicted, would have faced as long as 16 years on the four charges.
The undecided criminal charges were securities fraud, scheming to defraud and two counts of falsifying business records.
In the trial, the jury voted 11 to 1 for acquittal on those charges, jurors said afterward.
The charges against Sihpol grew out of his helping a now-defunct New Jersey hedge fund, Canary Capital Partners, trade in mutual funds after the stock market closed.
Spitzer contended that the late trading was a crime because it diluted the returns of fund members who weren’t granted the same advantage. Sihpol’s lawyers argued that late trading is legal and that their client never intended to commit a crime.