The honor of paying the stiffest penalty in the long-running mutual fund trading scandal goes to former investment advisers Harold Baxter and Gary Pilgrim.

In a settlement with regulators, the two men will each pay $80 million in fines and restitution. The deal with Baxter and Pilgrim trumps the $60 million penalty assessed earlier this year against Richard Strong, founder of the

Strong Funds

, which since has been acquired by

Wells Fargo

(WFC) - Get Report

.

In June,

Pilgrim Baxter & Associates

, the investment advisory firm founded by the two men, paid a $90 million fine for making improper market-timing trades in the

PBHG

family of mutual funds. The firm also agreed to cut its fees by $10 million.

Pilgrim Baxter, with $3.5 billion in assets under management, is now called

Liberty Ridge Capital

. The two founders are no longer associated with the firm. Both Liberty Ridge and the PBHG funds are divisions of British-based

Old Mutual

.

"The amounts being paid in this settlement are virtually unprecedented for individuals in civil cases,'' said Stephen Cutler, the

Securities and Exchange Commission's

director of enforcement.

Besides the fines, both Baxter and Pilgrim agreed to a ban that prevents either of them from working for another investment advisory firm or investment company. Baxter and Pilgrim were two of the first top mutual fund executives to be charged in the nearly 18-month investigation of the mutual fund industry.

Last November, regulators charged that Pilgrim was an investor in a small hedge fund that was permitted to actively trade shares of several PBHG funds, which personally netted Pilgrim $4 million in profits.

Baxter, meanwhile, permitted customers of a small New York brokerage firm,

Wall Street Discount Corp.

, to market-time shares of some PBHG funds. Regulators allege the owner of the brokerage firm is a friend of Baxter's.

In all, the regulators charged that up to two dozen investors were allowed to market-time Pilgrim funds. By 2000, the dollar volume of Pilgrim funds being market-timed exceeded $500 million.

New York Attorney General Eliot Spitzer joined in the settlement.