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Sihpol case dismissal seen: source

October 12, 2005

NEW YORK (Reuters) – The criminal case over improper mutual
fund trading against former Bank of America Corp. broker
Theodore Sihpol by New York Attorney General Eliot Spitzer is
expected to be dismissed as soon as Wednesday, a person close
to the matter said.

Sihpol, 38, is also expected to settle a related civil
lawsuit with the U.S. Securities and Exchange Commission,
people familiar with the matter said. That settlement is likely
to include a fine and a suspension from the securities
industry.

Brad Maione, a spokesman for Spitzer’s office, and John
Heine, a spokesman for the SEC, declined to comment. A
representative for Sihpol declined to comment.

A Manhattan jury in June had acquitted Sihpol on 29 counts,
including grand larceny and fraud, of helping the Canary
Capital Partners LLC hedge fund trade mutual funds illegally.

A meeting had been scheduled for October 20 before New York
State Supreme Court Justice James Yates on the status of the
four counts on which the jury had deadlocked.

Regulators accused Sihpol of helping Canary trade funds
after the market had closed but at the 4 p.m. closing price.
This “late trading” helped Canary make profits and avoid losses
by incorporating late-breaking news into its investment
decisions, a privilege not given ordinary investors.

Canary settled with Spitzer for $40 million without
admitting wrongdoing. The hedge fund was run by Edward Stern,
whose billionaire father Leonard ran Hartz Mountain Corp.

Sihpol still faces civil lawsuits.

(Additional reporting by Karey Wutkowski)




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