The SEC today sued PIMCO Advisors Fund, PEA Capital, PIMCO Advisors Distributors and several PIMCO top executives for allegedly defrauding investors by permitting hedge fund Canary Capital Partners to conduct rapid-fire trades in shares of the mutual funds.
The suit, filed in U.S. District Court in New York, alleges that PIMCO Advisors and affiliates and Stephen J. Treadway, chairman of the board of trustees of the PIMCO Funds, permitted Canary to conduct approximately 108 roundtrip trades valued at more than $4 billion between February 2002 and April 2003. Also named as a defendant is Kenneth W. Corba, PEA's former CEO.
"Even as they represented to ordinary investors that short-term and excessive trading was not allowed in the PIMCO equity funds, these defendants entered into a secret agreement permitting a single favored investor to engage in just that type of trading - a privilege that was denied to hundreds of other investors," said Randall R. Lee, director of the SEC's Pacific regional office in Los Angeles.
PIMCO spokesman Mark Porterfield did not return calls seeking comment. Michael T. Marcucci and Harvey Wolkoff, both attorneys for PIMCO at the Boston-based law firm Ropes & Gray, also did not return calls.