Former Bank of America broker indicted in fund late-trading case

The other five funds cited in the indictment are PIMCO Funds, MFS Family of Funds, Janus Investment Fund, Fred Alger Fund, and RS Investment Trust.

The judge ordered Sihpol to return to court April 21, when he is to be arraigned.

Sihpol will plead innocent, said one of his attorneys, Evan Stewart.

"Mr. Sihpol does not believe he committed any criminal wrongdoing," Stewart said.

Grand larceny carries a penalty of up to 25 years in prison; the other charges are punishable by up to four years each.

Sihpol remained free on $750,000 bail. The Securities and Exchange Commission is seeking civil penalties and disgorgement of Sihpol's alleged illegal profits.

The charges against Sihpol involve "late trading," in which favored investors are allowed to buy and sell funds at that day's prices well after the close of markets. This sets them up to profit on market-moving news that develops after the markets close.

Other investors who place late orders to buy the funds would have to pay the next day's closing price, losing out on that day's gains.

When trades were registered by hand, Sihpol would put a pre-4 p.m. time stamp on the orders and the Canary Capital Partners hedge fund could call later to confirm or cancel those orders, the indictment alleges.

The indictment alleges Sihpol, who was arrested on Sept. 16, falsified and destroyed order tickets that had been prepared for late mutual fund trades.

Attorney General Eliot Spitzer had announced two weeks earlier that Canary had agreed to pay $40 million to settle charges that it had improper trading arrangements with several companies, including Bank of America.

Spitzer said at a news conference after Sihpol's arrest that the defendant was "at the center of the relationship" between Canary and Bank of America.