WASHINGTON Feb 26 Three senior executives of
New Stream Capital, a Connecticut hedge fund, were arrested and
charged for allegedly lying about the fund's structure and
financial condition in 2008 before it failed.
A grand jury indicted Managing Partners David Bryson and
Bart Gutekunst and Chief Financial Officer Richard Pereira on
charges of conspiracy, securities fraud and wire fraud, the U.S.
Justice Department said.
The executives pleaded not guilty and were released on bail,
the department said.
The U.S. Securities and Exchange Commission filed related
charges against the three executives, and settled a related case
against the fund's head of investor relations Tara Bryson, who
is David Bryson's sister.
Attorneys for New Stream and the four executives had no
immediate comment or did not immediately respond to requests for
Authorities accused the executives of secretly revising the
fund's capital structure to prioritize the fund's largest
investor, Gottex Fund Management, while continuing to tell other
investors they were all on the same footing.
The $750 million fund, which focused on illiquid
investments, revised its structure in March 2008 after Gottex
threatened to redeem its investment, the SEC said.
A Gottex representative was not immediately available for
As the financial crisis worsened in September 2008, the fund
faced $545 million of redemption requests. It attempted
restructuring and filed for bankruptcy in March 2011, the SEC
"Hedge fund managers who put greed ahead of full disclosure
to investors violate a fundamental trust," said George Canellos,
acting director of the SEC's enforcement division.