Ex-Fund Manager Can’t Argue Regulator Corruption at His Threat Trial
A former hedge-fund manager charged with threatening to kill U.S. regulators can’t argue at his trial set to begin next week that his alleged targets were corrupt, a judge ruled.
Even if officials at the regulatory agencies were corrupt, “it does not justify a threat, if in fact one was made, to kill anyone of these individuals,” U.S. District Judge Denis R. Hurley said at a hearing today in Central Islip, New York.
Vincent P. McCrudden, 50, is accused of threatening the lives of 47 current and former officials, including Securities and Exchange Commission Chairwoman Mary L. Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler.
McCrudden, who was also a commodities trader, has been held without bail since he was arrested Jan. 13 returning from Singapore. He is charged with threatening the regulators, including those at the National Futures Association and the Financial Industry Regulatory Authority Inc., in profanity- filled e-mails and, after the CFTC sued him in December, in Web postings.
McCrudden has said he’s being persecuted for fighting back against unfair regulatory actions that destroyed his career.
His trial is set to begin with opening statements on July 18.
Prosecutors Christopher C. Caffarone and James McMahon sought to preclude evidence of alleged corruption at the agencies or of vendettas against McCrudden by their employees, saying there was no connection between the crimes he’s charged with and “the vague beliefs of unidentified members of an undefined group.”
McCrudden’s lawyer, Bruce A. Barket, said in a court filing that the information would put his client’s comments in the context of an ongoing public debate about the financial- regulation system.
The government charged that, after the CFTC accused McCrudden in the lawsuit of illegally starting his Hybrid Fund II LP in 2008 without registering it, he posted an “execution” list on his company website.
“Go buy a gun, and let’s get to work in taking back our country from these criminals,” he wrote on the site. “I will be the first one to lead by example.”
Prosectors said McCrudden wrote in a Sept. 30 e-mail to Daniel A. Driscoll, chief operating officer of the National Futures Association, that he had hired people to kill him. “It wasn’t ever a question of ‘if’ I was going to kill you, it was just a question of when,” McCrudden wrote, according to the government.
The e-mail was sent in CFTC Chairman Gensler’s name. Its language and origin in Singapore pointed to McCrudden, prosecutors said. McCrudden moved from Long Beach, New York, to the Southeast Asian country in September because his fiancée had gotten a position there.
McCrudden has denied sending the e-mail.
McMahon, the prosecutor, argued at the hearing that the Web postings provided the context for McCrudden’s statements.
“I don’t have a quarrel with the concept of context,” Hurley said.
“A reasonable person looking at this would understand it to be political hyperbole,” McCrudden’s lawyer Barket said at the hearing. The jury is entitled to know “that this is part of a political debate,” he said. “They are not the rantings of a lunatic.”
Hurley said that whether McCrudden’s free speech rights trumped his alleged violation of the law was a question for him, not the jury, to decide.
The judge ruled that McCrudden can’t introduce evidence of other extreme political speech such as a “Don’t Retreat, Reload” button that McMahon said was based on a quote by Sarah Palin, the former U.S. vice presidential candidate.
Hurley also ruled that McCrudden can introduce expert testimony that the address from which the Sept. 30 e-mail was sent -- the wireless system provided for guests at the Singapore hotel where McCrudden was staying -- was on computer-hacker lists of networks easily broken into.
Hurley also ruled that McCrudden’s experiences with regulators and the criminal-justice system can be introduced to the jury, saying that it would put McCrudden’s comments in context.
“That history should go before the jury,” the judge said.
McCrudden’s legal and regulatory entanglements began in 2000, when he was criminally charged with masking shortfalls in statements to his hedge-fund investors. The government alleged he included in his financial results money he expected to get from a lawsuit after Sumitomo Corp. (8053) was accused of manipulating the copper market.
In 2003, a federal jury in Central Islip acquitted McCrudden of all 15 counts of mail fraud he faced.
The National Futures Association in 2005 denied his registration application because of the alleged overstatements that resulted in that earlier criminal case. The CFTC and a federal appeals court upheld that decision.
In October 2009, the Financial Industry Regulatory Authority ruled that McCrudden induced Hedge Fund Capital Partners LLC, a New York broker-dealer where he had worked, to file a form saying he left voluntarily when he was fired, which McCrudden denied. The National Adjudicatory Council, which hears appeals of Finra decisions, upheld that finding.
McCrudden faces a maximum sentence of 10 years in prison on two federal counts of “transmission of threats to injure.”
The criminal case is U.S. v. McCrudden, 11-cr-61, U.S. District Court, Eastern District of New York (Central Islip).
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