A former Security Trust Company executive yesterday pleaded guilty to having disguised illegal trades for hedge fund clients, according to New York Attorney General Eliot Spitzer’s office. Nicole McDermott, formerly senior vice president of the Phoenix-based company, faces a maximum term of four years in prison. She is the third person to have pleaded guilty since Spitzer launched his inquiry in September. Two and a half weeks ago Security Trust was accused of helping hedge funds make illegal trades in mutual fund shares. The company CEO Grant Seeger and the company’s former president, William Kenyon, were arrested on 25 November on charges of securities fraud, grand larceny and falsifying business records.
“In the course of pleading guilty, McDermott admitted to directing STC employees to place numerous orders for mutual fund shares on behalf of two hedge fund clients after the 4:00 p.m. cutoff, but at the pre-4:00 p.m. price,” Spitzer’s office said in a statement. “She further admitted to employing a variety of methods to disguise the source of the hedge funds’ trades.”
In October, a former trader for hedge fund Millennium Partners pleaded guilty to securities fraud, related to late-trading of mutual funds. A former vice chairman at Fred Alger Management has also pleaded guilty to a criminal charge of obstruction of justice, having ordered staff to delete evidence of improper mutual fund trading. Security Trust administers $13 billion in retirement and pension assets for about 2,300 retirement plans.