Following an anonymous tip to Attorney General Eliot Spitzer, an influential New York family of investor was ordered to pay more than $30 million to investors in their Canary Capital Management mutual fund amid what has been called the biggest scandal in mutual fund history.
Noreen Harrington, a former Goldman Sachs employee, tipped off investigators to a ‘market timing’ scheme being performed by the Sterns that brought in large profits.
Initially calling the attorney general’s office anonymously, Harrington told authorities to “investigate mutual funds.”
She later said that while working for Edward Stern of the Stern family, she witnessed family employees taking advantage of the fact that mutual funds are only priced once a day while stock market prices change continuously. She also reported after-hours trading in mutual funds by the family.
In addition to the $30 million he was forced to pay investors, Stern will also pay an additional $10 million fine.