Jefferies paying $9.7 million in SEC case

December 05, 2006|By Walter Hamilton | Walter Hamilton,Los Angeles Times

NEW YORK -- A Wall Street trading firm was fined almost $10 million yesterday for showering employees of Fidelity Investments with improper gifts to win the mutual fund company's stock-trading business, in what one regulator called a "nauseating" abuse of the rules.

Jefferies & Co. agreed to pay $9.7 million to federal regulators to settle charges that former employee Kevin Quinn doled out more than $1.6 million in gifts, trips and entertainment that exceeded the $100 annual limit for each individual.

Quinn took wining and dining to a new level of lavishness, even by the indulgent standards of Wall Street, authorities found.

Fidelity traders were flown on chartered aircraft to the 2004 Super Bowl in Houston, where the tab for the weekend - including pregame parties hosted by Playboy and Maxim magazines - came to $125,000.

One Fidelity trader and his family were treated to weeklong vacations in Florida for two years running. Quinn even shelled out $75,000 for a trader's bachelor party in Miami, including paying for chartered flights between Boston and Miami for the bachelor and his friends.

"We found activity that was disturbing and, quite frankly, nauseating," said James Shorris, head of enforcement for the NASD, formerly the National Association of Securities Dealers.

Quinn, 40, agreed in settlements with the Securities and Exchange Commission and the NASD to pay almost $1.5 million and be barred for life from the securities industry.

Regulators discovered Quinn's spending during a routine audit of Jefferies' Los Angeles office in 2004. Though now based in New York, Jefferies had been based in Los Angeles, where 263 employees still work.

Boston-based Fidelity, the largest mutual fund company in the United States and the biggest provider of 401(k) retirement plans, remains under investigation in connection with the gifts, spokeswoman Anne Crowley said.

Of nearly two dozen Fidelity traders who received improper gifts, eight have left the company, and the others have been suspended, demoted or sanctioned, Crowley said, adding that there was no evidence any investors were harmed.

Quinn was hired by Jefferies in 2002 at a starting salary of $4 million a year. He was given an annual travel and entertainment budget of $1.5 million.

He had developed a relationship with Fidelity traders through his years in the institutional sales division at two other brokerages. His methods apparently generated results: Fidelity's trading business with Jefferies, which was worth $4 million in 2001, ballooned to $30 million by 2003, the NASD said.

Quinn was fired in 2004. Yesterday, his former supervisor, Scott W. Jones, was fined $50,000 and given a three-month suspension from working as a manager at any NASD-registered company.

Walter Hamilton writes for the Los Angeles Times.

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