Fund sued for $57M worth of illegal trades

Hedge fund management company Simpson Capital Management Inc. of New York, its owner and head trader, today were sued by the Securities and Exchange Commission for allegedly defrauding hundreds of mutual funds and their shareholders of $57 million by placing illegal late trades. The SEC says the firm defrauded hundreds of mutual funds and their shareholders of $57 million by placing illegal late trades. Between May 2000 and September 2003, Mr. Simpson and Mr. Dowling placed more than 10,000 illegal late trades in more than 375 mutual funds after the close of the market, the SEC said in a press release about the complaint filed in U.S. District Court for the Southern District of New York in Manhattan. Also charged was Robert Simpson, president and owner of Simpson Capital Management and head trader John Dowling. Mr. Levin represents Mr. Simpson and Simpson Capital Management. The attorney representing Mr. Dowling did not make a comment on the case. Simpson Capital Management is the investment advisory firm for two hedge funds, Simpson Partners LP and Simpson Offshore Ltd. Mr. Simpson, who was an investor in the hedge funds, earned at least $19 million in fees and profits as a result of the illegal late trades, the SEC said. The defendants bought the mutual funds at the daily closing price after the market had closed, allowing them to profit from events that took place after the market closed, the SEC said. “My clients will be vindicated,” said Mr. Simpson's lawyer, Alan Levine, a partner in the New York office of Cooley Godward Kronish LLP law firm of Palo Alto, Calif. The attorney representing Mr. Dowling did not make a comment on the case.