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U.S. Securities and Exchange Commission


Litigation Release No. 16394 / December 16, 1999


On December 16, 1999, the Securities and Exchange Commission sued New York pension fund manager Alan B. Bond for fraudulently receiving over $6.9 million in kickbacks from brokerage firms in connection with his management of the pension and investment funds of such notable clients as the National Basketball Association, the Washington Metropolitan Transit Authority and the City University of New York. Bond, Harvard educated and a frequent guest on television talk shows, used the kickbacks to purchase more than 75 luxury and antique automobiles and a large home and beachfront condominium in Florida.

On the same day, the United States Attorney for the Southern District of New York criminally charged Bond, and the second defendant in this lawsuit, Robert I. Spruill, for conduct alleged in the Commission's complaint.

The Commission's complaint, filed in the U.S. District Court for the Southern District of New York, alleges that, from September 1993 through November 1998, Bond received over $6.9 million in commission kickbacks from three brokerage firms. Bond directed trades to these firms through his former money management business, Bond, Procope Capital Management. The kickbacks he received were siphoned off the investment returns of his clients in the form of mark-ups on principal trades in the over-the-counter market. According to the complaint, Bond dictated to the brokerage firms the amount of the mark-up on each trade and the firms, in turn, kicked back 57-80% of the mark-ups to Bond. In most cases, the kickbacks were funneled through dummy corporations set up by Spruill, who worked as a registered representative at these firms. Bond then instructed the firms not to report the mark-ups on his clients' trade confirmations and account statements.

The Commission's complaint further alleges that most of the money in this scheme went to finance Bond's extremely lavish personal lifestyle. In addition to the 75 cars and the two real estate properties in Florida, Bond frequently went on shopping sprees spending as much as $200,000 to $470,000 a month. Bond also used some of the illicit payments to purchase gratuities for the trustees and employees of his pension fund clients.

As part of its lawsuit, the Commission charged Bond with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and Sections 206(1), 206(2) and 207 of the Investment Advisers Act of 1940 ("Advisers Act"). The Commission also charged Spruill with aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Advisers Act. The Commission is seeking permanent injunctions, disgorgement of all ill-gotten gains plus prejudgment interest and civil penalties against the defendants.

The SEC acknowledges the valuable assistance the United States Attorney's Office for the Southern District of New York and the United States Postal Inspection Service in bringing this case.