May 22 Three former executives of New Stream
Capital LLC, a failed Connecticut hedge fund, have pleaded
guilty to conspiring to mislead their clients to keep their
largest investor, federal prosecutors said on Thursday.
David Bryson, Bart Gutekunst and Richard Pereira each
pleaded guilty on Wednesday in the New Haven, Connecticut,
federal court to one count of conspiracy to commit wire fraud,
said the office of U.S. Attorney Deirdre Daly in Connecticut.
Bryson and Gutekunst were managing partners of Ridgefield,
Connecticut-based New Stream, while Pereira was its chief
All are free on bail, and face up to five years in prison
when they are sentenced in August. A trial was scheduled to
begin on June 2, court records show.
The defendants had pleaded not guilty in February 2013 to
securities fraud, wire fraud and conspiracy charges.
Authorities said New Stream was once a $750 million firm
that specialized in investments such as loans backed by real
estate and life insurance contracts.
Prosecutors said that in 2007, New Stream told foreign
investors that their Bermuda fund would be closing, and that
they needed to move their money into new Cayman Islands funds.
But when the firm's largest investor decided in March 2008
to redeem its entire investment in the Bermuda fund, New Stream
secretly decided to keep that fund open, and reorganize its
capital structure to give priority to that fund's investors,
Investors in other New Stream funds were not told about the
moves, or the degree to which investors were redeeming money,
Stanley Twardy, a lawyer for Gutekunst, declined to comment.
Lawyers for Bryson and Pereira did not immediately respond to
requests for comment.
The U.S. Securities and Exchange Commission, which filed a
related civil case, said New Stream faced $545 million of
redemption requests by the end of September 2008, causing it to
stop raising funds and to suspend redemptions. New Stream filed
for bankruptcy in March 2011.
Chief Judge Janet Hall in New Haven is scheduled to sentence
Bryson on Aug. 19, and Gutekunst and Pereira three days later.
The case is U.S. v. Bryson et al, U.S. District Court,
District of Connecticut, No. 13-cr-00041.
(Reporting by Jonathan Stempel in Toronto; Editing by Mohammad