Posted on: Friday, May 21, 2004
Ex-CEO to pay $60 million fine in trading scandal
By Xiao Zhang
Associated Press
MILWAUKEE — Strong Financial Corp. founder and former CEO Richard Strong agreed yesterday to a $60 million fine to settle allegations that he made improper mutual fund trades, becoming the highest level executive so far to admit his role in what has become an industrywide scandal.
The deal, and a related agreement for the company to pay $115 million in related penalties, could smooth the way for a sale of the company, analysts said. The agreement also bans Strong and two other company executives from the financial industry for life.
"You can't get any higher than the fellow who is CEO and chairman of the board and that's why his behavior has always struck as that much more egregious," New York Attorney General Eliot Spitzer said. Regulators insisted on a $60 million penalty for the $1.8 million in personal benefit that Strong received from the improper trades, he said.
The settlement is the latest in the improper trading scandal that has swept the $7 trillion mutual fund industry, resulting in subpoenas of dozens of companies and, in some cases, criminal charges.
Regulators said Strong, who did not admit to any wrongdoing as part of the settlement, will pay $30 million in disgorgement payments and $30 million in civil penalties for his actions.
The Menomonee Falls-based company that he founded will pay $40 million in the return of revenues from the trading and $40 million in civil penalties as part of the agreements with New York, Wisconsin, and the Securities and Exchange Commission.
It agreed to reforms that include new standards for board independence and accountability and will reduce its fees to Strong shareholders by 6 percent for five years, a reduction valued at $35 million.
"In previous years, I frequently traded the shares of the Strong funds, at the same time that the advice which we gave our investors was to do the opposite and to hold their shares for the long term," Strong said in a written statement.
"My personal behavior in this regard was wrong and at odds with the obligations I owed my shareholders, and for this I am deeply sorry."
