Pension manager pleads guilty to 10 more charges of fraud

Bond's plea deal separate from Md. fund allegations

October 12, 2002|By Michael Dresser | Michael Dresser,SUN STAFF

NEW YORK - Alan B. Bond, a convicted swindler who cheated Maryland's pension system and others out of tens of millions of dollars, pleaded guilty to more fraud charges yesterday as part of a plea bargain with prosecutors.

The former money manager admitted to 10 counts of conspiracy, investment advisory fraud and tax evasion as part of a scheme in which he took kickbacks from brokers to whom he gave work.

Bond was convicted in June in connection with a "cherry-picking" scheme in which he steered profitable trades into his personal account and losing transactions to his clients, including the Maryland pension system.

He remains a key figure in a separate federal investigation of Baltimore investment banker Nathan A. Chapman Jr.

State records show that Bond, while under Chapman's supervision, used more than $5 million in pension money to invest in companies that Chapman controlled.

U.S. District Judge Thomas Grisea could sentence Bond to up to 40 years in prison and about $10 million in fines for his conviction yesterday.

The penalty is likely to be substantially less if he cooperates with prosecutors in other investigations.

Bond, 41, has been in jail awaiting sentencing on his first conviction since he was found guilty in June. He stood before Grisea yesterday in a dark blue prison uniform. "At all times, I knew it was wrong to take money of my clients for my own benefit without disclosure," he said.

Terms not disclosed

Neither federal prosecutors in New York nor Bond's attorney, Jeffrey G. Pittell, would disclose the terms of the plea bargain. Typically, such agreements require a defendant to cooperate with investigators in exchange for a recommendation of leniency.

Federal guidelines call for a sentence of nine to 11 years for his conviction in the cherry-picking scheme, which cost the Maryland pension system and other Chapman clients an estimated $40 million, according to prosecutors.

Prosecutors would not say what guidelines apply to yesterday's guilty plea. It is up to the judges in the two cases to determine whether the sentences will be served concurrently or consecutively.

George Canellos, an assistant U.S. attorney for the Southern District of New York, outlined a scheme in which Bond took more than $5 million in kickbacks from brokers that he failed to disclose on his income tax returns.

Canellos said Bond conspired with broker Robert I. Spruill to steer his clients' funds to three brokerages where Spruill was employed from 1993 to 1998. Canellos said that as part of the scheme, Bond let Spruill charge excessive commissions to the clients.

In return, Spruill kicked back 70 percent of the sometimes inflated commissions to Bond, according to the indictment. The kickbacks were disguised as credits to the clients for future services - known in the brokerage business as "soft dollars" - but the money was diverted into Bond's accounts, the indictment states.

The government charged that Bond used the money to support a "lavish lifestyle" that included membership in social clubs, the purchases of vacation homes and condominiums and a collection of dozens of cars.

The Maryland retirement system was not named as a victim in the kickback scheme. Prosecutors identified the clients that lost money as the pension plans for National Basketball Association players, the Southeastern Pennsylvania Transportation Authority and the Washington Metropolitan Area Transit Authority.

Kickback charges

Many of Bond's pension plan clients dropped him as a money manager after he was indicted on the kickback charges in 1999.

The Maryland pension plan allowed Chapman to keep Bond as a manager after Chapman assured system officials that the charges were "trumped-up," according to retirement system spokesman Joseph M. Coale.

At Bond's trial in May and June, prosecutors alleged that Bond's motive for devising the cherry-picking scheme was to pay the large legal bills he ran up as a result of the earlier indictment. He was indicted on the cherry-picking charges in August of last year.

Prosecutors said they brought the second set of charges to trial first because of the greater complexity of the kickback case.

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