Nov. 17, 2004 — The founders of the PBHG mutual funds agreed to pay $160 million in restitution and fines and to accept a lifetime from the securities industry to settle charges that they allowed selected investors to rapidly trade in and out of the funds, regulators said on Wednesday.
Gary L. Pilgrim and Harold J. Baxter will each be fined $20 million and return $60 million to shareholders under the settlement, which was announced by New York Attorney General Eliot Spitzer and the Securities and Exchange Commission.
The settlement resolves charges that the two men facilitated market timing arrangements with favored investors despite strict limits on this type of trading that were imposed on other shareholders.
“As founders of a company that bore their names, Mr. Pilgrim and Mr. Baxter should have set an example of integrity and fair play,” Spitzer said in a statement. “Instead, they were at the center of improper conduct that deceived and harmed their clients.”
The settlement follows one announced in June under which Pilgrim Baxter & Associates agreed to pay $100 million to resolve charges that it allowed some investors to market time the funds. Pilgrim and Baxter left the company, which is now known as Liberty Ridge Capital, a year ago.
State and federal regulators had charged that the two men permitted certain hedge funds, including one that Gary Pilgrim had an interest in, and other investors to make improper trades. Regulators said PBHG funds also selectively disclosed the portfolio holdings of some of the funds to facilitate market timing by the hedge funds.
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