Ex-hedge fund broker guilty

NEW YORK — A former broker with Millennium Partners hedge fund pleaded guilty Thursday to a felony charge for illegal late trading of mutual fund shares, part of a quickly broadening investigation that has touched many of the best-known names in the business.

Steven B. Markovitz, 41, admitted that he and other traders "intentionally engaged in fraud, deception (and) concealment" to buy and sell mutual fund shares at the closing price after the New York market closed. His plea requires him to cooperate with New York Attorney General Eliot Spitzer's sweeping investigation of the mutual fund industry that has cast a shadow over a main investment vehicle for many Americans.

Under Securities and Exchange Commission rules, trades made after 4 p.m. Eastern must be sold at the next day's price, set at market close. Investors who engage in late trading can take advantage of events that occurred after the markets closed and profit in ways other shareholders can't. Spitzer has said such illegal practices may be costing mom-and-pop investors billions of dollars.

The criminal complaint said Millennium's illegal trades occurred from late 2001 or early 2002 through July 2003. Assistant Attorney General Kevin Suttlehan would not say how much profit they might have generated for Millennium, a hedge fund operator with more than $4 billion under management, nor did he name the mutual funds on the other side of the trades.

State Supreme Court Justice James Yates told Markovitz that his sentence on Dec. 15 could range from no jail time to a maximum of four years in prison and would depend on the recommendations of prosecutors.

Separately, in partial settlement of fraud allegations by the SEC, Markovitz agreed that he would be barred for life from the securities industry.

Markovitz, of New York City, and his lawyers declined comment as they left court. He is free without bail.

Spitzer said the plea "is a clear step forward in the investigation and prosecution of wrongdoing in the mutual fund industry. Working with the SEC, my office will continue to pursue this matter aggressively."

Spitzer made the details of his investigation public last month, when his office accused Canary Capital Partners, a multimillion-dollar hedge fund, of securing special trading privileges at several big-name mutual fund companies. Canary settled for $40 million without admitting or denying wrongdoing, and agreed to cooperate with investigators.