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Funds probe spreads to Alliance Capital
By JUSTIN POPE
Associated Press
2/5/2004
BOSTON - In the latest legal blow to a major mutual fund company, Massachusetts regulators accused the parent company of Franklin Templeton Investments of fraud Wednesday, alleging the firm let a Las Vegas businessman make $45 million worth of improper mutual fund trades in exchange for his $10 million investment in a Franklin hedge fund.
The allegations concern dealings between Franklin and Las Vegas securities broker Daniel Calugar, who had already been accused by the Securities and Exchange Commission of earning $175 million from improper trading in mutual funds managed by Alliance Capital Management and Massachusetts Financial Services.
In a civil complaint filed Wednesday, the Massachusetts Securities Division contended Calugar made a similar deal with Franklin Templeton, the No. 4 mutual fund company with $337 billion assets under management.
The complaint names only San Mateo, Calif.-based Franklin Resources and its subsidiaries as respondents, but says that Calugar's activities were known to top management, including William Post, who until mid-December was president and chief executive of the northern California region for Templeton/Franklin Investment Services.
"Senior Franklin Templeton executives had knowledge of and furthered the activity and were reluctant to pass up the profits generated by courting multimillion dollar hedge fund clients," the complaint states.
Franklin, however, released a statement saying the proposal was "unauthorized and rejected by management."
Calugar's legal troubles are the latest in the improper fund trading scandal that has quickly spread across the $7 trillion fund industry. The investigation by state and federal authorities has expanded to dozens of other fund companies.
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