Former hedge fund managers agree to plead guilty to fraud
BOSTON (Reuters) - Two former hedge fund managers who boasted Ivy League credentials and invested some of their clients' money with swindlers Bernard Madoff and Thomas Petters, agreed to plead guilty to criminal charges that they lied about their investment record, the U.S. attorney in Boston said on Tuesday.
Gabriel Bitran, 69, a former professor at the Massachusetts Institute of Technology and associate dean at its business school, and his son Marco Bitran, 39, will be sentenced to serve at least two years but no more than five years in prison if the court accepts the pleas, U.S. Attorney Carmen Ortiz said in a statement.
No dates have been set for when the men will make their guilty pleas or when they will be sentenced.
The men founded hedge fund GMB Capital Management in 2005 and raised more than $500 million from wealthy investors who wanted a piece of the MIT's professor's exclusive computer models, which the pair falsely said had never suffered a down year and delivered double-digit returns ranging between 16 percent and 23 percent.
But instead of investing the money themselves, the Bitrans who boasted degrees from MIT and Harvard University and work experience at Wellington Management, put it with others, including Tom Petters' and Madoff's frauds.
At the height of the financial crisis when several of the Bitrans' funds plunged in value in the fall of 2008, the pair pulled roughly $12 million of their own money out but left their investors stuck in tumbling investments, Ortiz said. The men lost more than $140 million of GMB investors' principal.
Marco Bitran's lawyer said that he looks forward to putting the matter behind him, while Gabriel Bitran's lawyer said that he accepts responsibility and is pleased that there will be a resolution of the matter.
Two years ago, the men settled civil charges with the Securities and Exchange Commission when they neither admitted nor denied the SEC's findings and agreed to disgorge $4.3 million, pay a $250,000 fine each and be barred from the securities industry, the SEC said.
Madoff is serving 150 years in prison for turning his wealth management business into a giant Ponzi scheme. Petters was sentenced to 50 years in prison on similar charges.
(Editing by Jonathan Oatis)