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Ex-Bank of America broker faces retrial over funds

July 7, 2005

NEW YORK (Reuters) – Former Bank of America Corp. broker
Theodore Sihpol, acquitted last month on most counts of helping
a hedge fund trade mutual funds illegally, will be retried on
four counts on which the jury deadlocked, lawyers in the case
said on Thursday.

Justice James Yates of New York State Supreme Court set an
Aug. 22 date for the new trial, expected to last four to five
weeks. The earlier verdict was a defeat for New York Attorney
General Eliot Spitzer, in the first trial stemming from probes
into Wall Street stock research, mutual funds and insurance.

Prosecutors accused Sihpol of helping the Canary Capital
Partners LLC hedge fund trade mutual funds as late as 6:30 p.m.
and yet still get the 4 p.m. price, known as “late trading.”
This helped Canary generate market-beating returns by using
late-breaking news to make profits or avoid losses.

Jurors on June 9 acquitted Sihpol of seven counts of grand
larceny and 22 other counts, after a nearly six-week trial and
six days of deliberations.

They deadlocked on one count each of fraud and scheming to
defraud, and two counts of falsifying business records. Sihpol,
37, faces up to four years in prison on each remaining count.

“I think it is an odd response under those circumstances to
bring a new trial,” said Paul Shechtman, a partner at Stillman
& Friedman PC, who represents Sihpol. “My guess is most
prosecutors’ offices would not have followed this course.”

Shechtman said he learned Wednesday night of the decision
to retry his client. The jury had deadlocked 11-1 for acquittal
on the four remaining counts, he said.

Lead prosecutor Harold Wilson, an assistant New York
attorney general, declined to comment, as did Marc Violette, a
spokesman for Spitzer.

The defense has argued that Sihpol thought Canary’s trades
were proper, made no attempt to conceal them and had no
criminal intent.

Sihpol still faces possible civil action by the U.S.
Securities and Exchange Commission. It wasn’t clear how the
timing or nature of such an action might affect the criminal
trial.

‘SWISS CHEESE’

A conviction might encourage other prospective defendants
to settle with Spitzer because it would “impose a fear that
Spitzer will prosecute them to the fullest extent,” said Ron
Geffner, a partner at Sadis & Goldberg LLC in New York.

“The attorney general has already lost most of this
battle,” Geffner said. “It can’t get much worse.”

Spitzer has accused American International Group Inc. and
former chief executive Maurice “Hank” Greenberg in a lawsuit of
accounting fraud, and is suing former New York Stock Exchange
Chairman Richard Grasso over his pay package.

The defense plans to file a motion asking Yates to exclude
matters on which the first jury acquitted Sihpol. A hearing is
set for Aug. 15.

If the motion is successful, Shechtman said the
prosecution’s case might “look like Swiss cheese, because it
will have so many evidentiary holes.”

Charlotte, North Carolina-based Bank of America agreed to
pay $675 million to settle regulatory charges over its mutual
fund practices, and Canary settled with Spitzer for $40
million. Neither admitted wrongdoing.

Canary was led by Edward Stern, whose billionaire father
Leonard ran Hartz Mountain Corp.




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