Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.
  • Exclusive Online Only Content
  • Free Daily Email News Alerts
  • Asset Management Blogs

Haidar Hedge Fund Group To Pay $4.58 Million Fine

Hedge fund companies Haidar Capital Management and Haidar Capital Advisors, along with their owner, Said Haidar, have settled mutual fund trading charges by the Securities and Exchange Commission with a fine of $4.58 million. Haidar and his companies, however, neither admitted to nor denied the charges.

The SEC said that the companies earned profits of $3.3 million on $143 million in rapid mutual fund trades between 2001 and 2003 and that to shield its activity, the company created eight subsidiaries to carry out these trades, used broker/dealers with multiple registered representative numbers and also placed trades through variable annuities.

Haidar placed a majority of these trades with Southwest Securities, which, in 2005, paid $10 million to settle charges that it failed to supervise brokers who permitted abusive trades.

"We believe this settlement is in the best interests of our investors and our companies," Shawn Pattison, a Haidar spokesman, told Reuters."We note that the settlement places no restrictions on our business, and, as always, we remain focused on generating superior returns for our shareholders."

Fugitive Hedge Fund Exec

Finally Nabbed in Austria

Michael Berger, whose hedge fund went bust in January 2000 and lost $400 million and who has been a fugitive since March 2002, was caught and arrested in Austria.

Berger, 35, launched Manhattan Investment Fund in 1996, and the fund suffered huge losses when Berger bet against technology and Internet stocks. Austrian native Berger pled guilty to charges of securities fraud in a Manhattan court in 2000 and then fled to Austria.

"He was in hiding. It took quite a long time until we hit on where he was," Gerald Hesztera, a spokesman for Austria's federal police, told Reuters. "We were seeking him for five years, together with the FBI."

In the 1990s, Berger raised $575 million from investors by overstating the performance and market value of the hedge fund's holdings, prosecutors stated in proceedings against Berger in 2000.

He admitted in his guilty plea that he sent out deceptive statements to investors. He tried retracting the plea a year later, saying he was mentally incompetent at the time he admitted guilt. A judge rejected his motion, stating that there was no evidence that he was not competent at the time of his plea.

He was released on bail but did not show up at court for his March 1, 2002 sentence hearing.

Since Berger is an Austrian national, he cannot be sent back to the U.S., where he would face up to 10 years in jail and minimum fines of $1.25 million plus reimbursement. Nonetheless, Vienna-based Bank Austria lost money in his scheme and has charged him with fraud as well.

R.I. Fines Morgan Stanley

$250K Over Fund Sales

Rhode Island has fined Morgan Stanley $250,000 for not supervising two Providence brokers who, regulators said, engaged in unethical and dishonest practices when selling mutual funds and variable annuities, Reuters reports.

The fine stems from an investigation begun three years ago following complaints from four investors. In one instance, an investor said a broker sold them low-cost products but then moved them into far more expensive ones. In another, the same broker sold an annuity to an 80-year-old. The other broker failed to obtain breakpoints for a client.

Richardson Would Look at

A National Pension System

In the thicket of Democrats running for the White House, New Mexico Gov. Bill Richardson outlined some of his tax and economic ideas for BusinessWeek.

Among them, Richardson called for a national pension system to replace Social Security akin to a 401(k) that would be portable as workers moved from job to job, he said.

When it comes to keeping cuts to the dividend and capital gains taxes, Richardson's answers are somewhat ambivalent.

As for the capital gains tax, which went from 20% to 15% in 2003, but is scheduled to be revised again in 2010, Richardson said he'd push to keep it. "I'm a pro-growth Democrat," Richardson said. "As president, I would use the tax code to incentivize the economy. I would give tax incentives to companies that pay over the prevailing wage, to technology startups, to companies that move into rural areas. I would try to get tax simplification, tax fairness. I would increase tax incentives for the middle class."

But keeping the 15% rate for dividends, which were taxed at 35% before the 2003 law, might be a different story. "I would look at all the Bush tax cuts but not make them permanent. I believe we have to shift them to the middle class," he said.

Investors Shying Away

From High-Yield Bonds

Due to worries about the subprime woes affecting the mortgage market and the risks of high-yield bonds, investors are moving their money out of mutual funds that specialize in these sectors and into better-quality bond funds, such as Treasuries, which are enjoying rising yields, The Wall Street Journal reports.