Bridgeway Capital Management and its president, John Montgomery, agreed to a $5 million settlement with the SEC over allegations that shareholders were overcharged performance fees on three Bridgeway mutual funds between July 1995 and March 2004. The settlement, announced today, requires Bridgeway to reimburse shareholders for the performance fees, along with interest, and assesses penalties of $250,000 to Bridgeway and $50,000 to Mr. Montgomery. In a three-page letter to shareholders today, Mr. Montgomery said: "Plain and simple, we broke the rule, which is the same as the underlying law." He accepted responsibility for miscalculation of the fees and added that the firm has hired an outside law firm to guide it on the issue of performance fees; the independent directors also hired separate counsel. In addition, the company is strengthening compliance, he told shareholders.