Ex-New Stream Partner Gets 2 1/2 Years for Fraud SchemeChris Dolmetsch
A former managing partner of Connecticut-based hedge fund New Stream Capital LLC will serve 30 months in prison after pleading guilty to charges he helped mislead clients to keep the firm’s largest investor.
Bart Gutekunst, 63, of Weston, along with former New Stream executives David Bryson and Richard Pereira, pleaded guilty in May 2014 to a single count of conspiracy to commit wire fraud. Bryson was given a 33-month federal prison term on Tuesday. Pereira is scheduled to be sentenced Thursday.
U.S. District Judge Janet C. Hall in New Haven on Wednesday also ordered Gutekunst to serve three years of supervised release after his prison term.
New Stream, based in Ridgefield, started feeder funds in November 2007, including one based in the U.S. and some in the Cayman Islands, while closing its existing Bermuda Fund and requiring all foreign investors to move their investments into the Cayman fund, according to the U.S. attorney in Connecticut.
When the firm’s largest investor tried to redeem its entire investment in March 2008, Bryson and Gutekunst, managing partners and principals at New Stream, and Pereira, its chief financial officer, ordered staff to secretly reorganize the fund’s structure in an effort to stop the redemption, the government said.
The three men were arrested in February 2013 and faced as long as five years in prison. They were scheduled to go on trial in June 2014 before pleading guilty. Prosecutors say the fund’s investors were defrauded out of more than $46 million and that Gutekunst and Bryson collected more than $5 million each in management fees and profit sharing.
The U.S. Securities and Exchange Commission sued the three men in federal court in New Haven in 2013 over the firm’s collapse, saying they concocted a scheme to secretly revise the hedge fund’s structure to placate Gottex Fund Management Ltd., its largest investor with a stake of almost $300 million, by giving it and other preferred offshore investors priority over others in the event of a liquidation.
The hedge fund was facing more than $500 million in redemption requests as the U.S. financial crisis worsened by the end of September 2008, leading it to suspend redemptions and stop raising new funds. The firm filed for Chapter 11 bankruptcy in March 2011 in Delaware, and a court confirmed its plan in April 2012.
The case is U.S. v. Gutekunst, 3:13-cr-00041, U.S. District Court, District of Connecticut (New Haven).