Nathan A. Chapman Jr., head of Chapman Capital Management, was indicted today by a federal grand jury for mail fraud, wire fraud, securities fraud and conspiracy. Federal prosecutors said Mr. Chapman used $5 million he managed for the $24.6 billion Maryland State Retirement & Pension System, Baltimore, to invest in his own company. He faces up to 200 years in prison and $10.5 million in fines, plus possible restitution to the retirement system, if convicted on all 39 counts.
Thomas M. DiBiagio, U.S. attorney in Maryland, said Mr. Chapman - through one of his subadvisers, Alan Bond - used retirement system assets to buy shares of eChapman.com, a company formed by merging The Chapman Co. and Chapman Capital. The system lost $4.7 million in that investment before terminating Mr. Chapman in 2002, after learning he was under SEC investigation for the eChapman.com investment. Mr. Bond was convicted in unrelated cases.
Also, Mr. Chapman is accused of giving $46,000 to Debra B. Humphries, a Maryland pension trustee. The indictments claim Mr. Chapman helped Ms. Humphries conceal both his payment to her and the resulting conflict of interest; she faces separate perjury charges for lying to a grand jury.
Mr. Chapman did not return a call to his office seeking comment; Ms. Humphries could not be reached for comment by press time. A person answering the phone at Potomac Asset Management, where Ms. Humphries was senior fixed-income manager, said she left the firm "very recently."
Mr. Chapman will be arraigned July 3.