- The Washington Times - Tuesday, October 7, 2003

CHARLOTTE, N.C. (AP) — Bank of America Corp. will establish a restitution fund for shareholders of its Nations Funds who lost millions of dollars because of purported improper trading that gave a hedge fund advantage over other investors.

“Nothing is more important in our business than the trust and confidence of our customers and clients,” Chairman and Chief Executive Officer Ken Lewis said in announcing the news yesterday.

Bank of America had said last month that it would repay members of its Nations Fund if an analysis finds that investors suffered a loss purportedly from late trading with Canary Capital Management LLC. The arrangements allowed Canary to cash in on after-hours news ahead of other investors by getting that day’s closing fund price after 4 p.m., though regulations require those trades to be priced at the next day’s closing price.

Criminal charges were filed against a Bank of America broker last month, shortly after he was fired, reportedly for involvement in the late trades.

The Charlotte, N.C.-based bank is the third investment firm to pledge restitution in a mutual fund scandal that is widening.

Last month, Canary and its managers agreed to pay $30 million in restitution for profits generated from improper trading and a $10 million penalty to settle charges lodged by New York Attorney General Eliot Spitzer.

Mr. Spitzer said Canary engaged in illegal trading practices with mutual funds operated by Bank of America, Janus, Bank One Corp. and Strong Financial Corp.

Mr. Spitzer’s complaint said Bank of America had the most extensive trading relationship with Canary, providing special treatment in exchange for business from the hedge fund’s owner, Edward J. Stern, heir to the Hartz pet-supplies fortune.

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