Alan Brian Bond, the
-educated fund manager famous for his appearances on television investing programs, used his control over his high-profile clients' investments to reap more than $6.9 million in kickbacks from brokerage firms, federal prosecutors charged in a criminal indictment unsealed Thursday.
The indictment, filed in
United States District Court for the Southern District of New York
, charges Bond with 11 criminal counts, including conspiracy, investment advisory fraud, wire fraud, commercial bribery and making false certifications on forms filed with the
Securities and Exchange Commission
. Each count carries a maximum penalty of five years in jail and a fine of up to twice the amount of money gained from the offense he is accused of committing.
A related civil lawsuit, filed in the same court by the SEC, contends that Bond used the kickbacks to buy cars and real estate and to pay for shopping trips costing hundreds of thousands of dollars.
"He will plead not guilty," said John Siffert, a lawyer for Bond. "We expect that he will be vindicated."
In separate filings, the prosecutors also charged Robert I. Spruill, a securities broker, with one count of conspiracy and one of commercial bribery. The charges carry the same maximum penalties. The two men met when both worked for the now-defunct brokerage
in the early 1990s, said an SEC spokesman, Clifford C. Hyatt.
From September 1993 to November 1998, the indictment charges, Bond directed money from his clients -- including the
Washington Metropolitan Transit Authority
City University of New York
-- to brokerage firms that employed Spruill, the indictment charges.
Those firms included Manhattan-based
, since acquired by
South Coast Capital
Value Investing Partners
Lintz Glover White
of California, where the SEC investigation began.
Government examiners in the SEC's Los Angeles regional office, performing routine inspections of Lintz Glover's records, began to question why a fairly famous New York broker dealer would direct so many trades to a small California brokerage, touching off the investigation, according to Hyatt, the SEC spokesman.
According to the government documents, investigators discovered that Spruill had set up phony corporations to direct commissions back to Bond.
Bond, Procope Capital Management
, of which Bond is president, changed its name to
Albriond Capital Management
in January, according to a woman who answered the phone at Albriond but did not give her name. She said Bond still worked there.
Hyatt said Spruill created a company called
to funnel money from the brokerage firms back to Bond's
card and to wire cash to Bond. The SEC lawsuit accuses both men of fraud and filing false documents to the agency, and it asks for the return of any ill-gotten gains.
Bond had approximately 25 clients and managed more than $600 million, according to the court filings.
Bond has known about both investigations since at least July, when he effectively denied the allegations in a filing with the SEC. In the filings, Bond said he had a joint interest in real estate, an audio business and collecting antique cars with Spruill.
In the filings, Bond said the relationship was not a factor in choosing broker-dealer firms.
"Although these relationships could potentially conflict with Registrant's duty to obtain best execution for client accounts, Registrant believes that it has consistently obtained best execution for its clients," he wrote.
Two clients of Bond said they did not think the alleged kickback schemes affected the performance of the funds he managed.
Ray Feldmann, spokesman for the Washington Metropolitan Transit Authority, said Bond was one of 10 fund managers hired to handle investments for the transit union
, which represents 6,200 of the authority's 8,800 employees. He was retained from June 1992 until Aug. 31, 1999. The SEC told the union's board of trustees in May that the agency was investigating Bond, and the union began its own investigation, according to Feldmann.
The union dismissed Bond, but Feldmann said he did not know whether the union's private investigators discovered wrongdoing or whether Bond was discharged because of the existence of an SEC investigation.
"No employee funds were lost in any way," Feldmann said.
The City University of New York is still investigating the matter but has not fired Bond, said Rita Rodin, a university spokeswoman.
Albriond is one of four firms that manage approximately $35 million of the university's $140 million in total investments, she said. All the assets are held in the
Chase Manhattan Bank
( CMB), she said.
"He has only been indicted," Rodin said. "At the moment, he is still managing."
She said the university's investments seem to be doing well but are under review.