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In the News

Spitzer Drops Counts Against CIBC Ex-Director Flynn
By Thom Weidlich
BLOOMBERG
November 21, 2005

Nov. 21 -- Attorney General Eliot Spitzer of New York dropped criminal charges against Paul Flynn, former managing director of Canadian Imperial Bank of Commerce, who was charged in a case stemming from Spitzer's mutual-fund investigation.

Spitzer asked for and was granted dismissal of the charges in state court this morning, his spokesman Brad Maione confirmed. Maione declined to comment further.

"After losing the Ted Sihpol case, Spitzer seems a bit gun shy and is unwilling to take a case that he doesn't consider to be a slam dunk," said Jacob Zamansky, a lawyer whose 2001 claim against Merrill Lynch & Co. helped spark Spitzer's probe of biased Wall Street research.

On Oct. 12 Spitzer dropped the four remaining criminal charges against Theodore Sihpol III. The former Bank of America broker settled a civil suit with the U.S. Securities and Exchange Commission that accused him of helping a hedge fund illegally trade in mutual funds after hours at the expense of other investors.

In June, a jury acquitted Sihpol of 29 counts of larceny, securities fraud and falsifying business records stemming from his helping the hedge fund, Canary Capital Partners LLC, late trade. The jury hung on four counts. Edward Stern, who ran Canary, settled charges against him for $40 million.

Flynn was accused of arranging financing for two hedge funds, Canary and Samaritan Asset Management, so they could illegally trade in mutual funds after hours. The former banker was charged with five felonies: two counts of grand larceny, two counts of violating the general business law and one count of scheme to defraud. His trial was scheduled to start today.

David Gendelman, Flynn's lawyer in New York, didn't return a phone call.

CIBC Settlement

In July, CIBC, Canada's fifth-largest bank, agreed to pay $125 million to settle claims by Spitzer and the SEC that it loaned money to the hedge funds for the trades. CIBC, which didn't admit or deny wrongdoing, provided brokerage services and more than $1.3 billion in financing to hedge funds that used market-timing strategies, according to Spitzer's July statement.

The hedge funds used the money to make trades through Security Trust Co., a Phoenix-based retirement plan administrator, according to Flynn's indictment.

In August, two former Security Trust executives, Grant Seeger, 42, and William Kenyon, 59, pleaded guilty to securities fraud and were sentenced to probation for their role in helping Canary and Samaritan late trade by disguising them as employee- benefit plans.

Spitzer's office has obtained nine guilty pleas since the investigation of illegal trading in the mutual fund industry began two years ago, it said in an Aug. 30 statement and Maione confirmed today.

"Settlements negotiated by the office with a dozen firms have brought about sweeping reforms of the industry and returned more than $3.1 billion to investors," the statement said.

Shares of Canadian Imperial rose 46 cents to C$74.96 at 12:39 p.m. trading on the Toronto Stock Exchange.

The case is New York v. Seeger, Nos. 7449/2003 and 2686/2004, New York Supreme Court.

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