New Stream Fund Executives Charged With Securities FraudDon Jeffrey
Three New Stream Capital LLC hedge fund executives were charged by the U.S. with defrauding investors by lying about fund closings to avoid losing a client.
David Bryson, 44, and Richard Pereira, 40, both of Ridgefield, Connecticut, and Bart Gutekunst, 61, of Weston, pleaded not guilty to charges of conspiracy, securities fraud and wire fraud in federal court in Hartford today, Connecticut U.S. Attorney David Fein said in a statement.
“Fearing the loss of their fund’s largest investor, these defendants orchestrated a scheme to deceive investors in order to obtain and maintain investments,” Fein said. The investor wasn’t named.
New Stream introduced new feeder funds in November 2007, some based in the Cayman Islands, according to the statement. The firm told investors they would have to move investments from a Bermuda-based fund, which was closing, to the new ones.
When New Stream’s largest investor planned to redeem its investment in the Bermuda fund and not move its money to the new funds, the company devised a scheme to secretly keep the Bermuda fund open to reverse the redemption, prosecutors said.
The defendants failed to inform other investors who had transferred their funds that the Bermuda fund remained open and would have priority over other funds, the prosecutors said. The defendants used deceptive marketing materials to hide the existence of the Bermuda fund, according to the statement.
Bryson and Gutekunst were released on $5 million bonds, Pereira on a $300,000 bond. If convicted, they face as long as 20 years in prison on each of 10 counts of securities fraud and eight counts of wire fraud. The one count of conspiracy carries a five-year maximum sentence.
“Mr. Gutekunst and others relied on professionals including lawyers and accountants,” Stanley Twardy, Gutekunst’s lawyer, said in a phone interview. “He looks forward to having the opportunity to acquit himself at trial.”
James Glasser, a lawyer for Bryson, and Brian Spears, a lawyer for Pereira, didn’t immediately respond to messages for comment.
New Capital had its liquidation plan approved by the U.S. Bankruptcy Court in Delaware in April. Investors in the funds received recoveries of 7 percent to 19 percent, according to the liquidation plan. The firm specialized in “non-traded private debt,” which consisted primarily of a portfolio of life-insurance policies.
The case is U.S. v. Bryson, 13-cr-00041, U.S. District of Connecticut (New Haven).