U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 18461 /November 17, 2003
SEC v. Paul J. Silvester et al., (United States District Court for the District of Connecticut, Civil Action No. 3:00 CV 1941 (SRU))
United States v. Triumph Capital Group et al. (United States District Court for the District of Connecticut, Criminal Action No. 3:00 CR 217 (EBB))
Triumph Capital Group, Inc. and Frederick W. McCarthy Settle SEC Fraud Charges
Triumph and Charles B. Spadoni Found Guilty by Jury in Criminal Action, and McCarthy Pleads Guilty to Criminal Charges
The Securities and Exchange Commission announced today that on October 28, 2003, the Connecticut federal district court entered final judgments by consent in a fraud action filed by the Commission against Triumph Capital Group, Inc., an investment firm headquartered in Boston, Massachusetts, and its chairman, Frederick W. McCarthy. The Commission's charges against Triumph and McCarthy arose out of an alleged fraudulent scheme involving the former Connecticut State Treasurer's investment of state pension fund money with private equity firms, including Triumph, in exchange for the firms' agreement to pay lucrative fees to the Treasurer's friends and associates. In a complaint filed against eleven defendants in the United States District Court for the District of Connecticut on October 10, 2000, the Commission alleged that Paul J. Silvester, the former Treasurer of the State of Connecticut, agreed to invest $200 million of state pension funds with Triumph in November 1998. The complaint alleged that in return, Triumph, through its chairman McCarthy and its general counsel Charles B. Spadoni, agreed to provide $1 million consulting contracts to Silvester's friends, Christopher A. Stack and Lisa A. Thiesfield.
The Commission's complaint alleged that Triumph and McCarthy violated their fiduciary duty to the state pension fund by failing to disclose the alleged quid pro quo arrangement. Triumph and McCarthy, without admitting or denying the allegations contained in the Commission's complaint, consented to the entry of final judgments against them. Triumph agreed to the entry of a permanent injunction against future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. McCarthy agreed to a permanent injunction against future violations of the same provisions, a civil penalty of $110,000, and a permanent bar from serving as an officer or director of any publicly-traded company.
On July 16, 2003, Triumph and Spadoni were found guilty by a jury in a related criminal trial for their roles in this matter. The jury found Triumph and Spadoni guilty of various charges, including racketeering and racketeering conspiracy concerning acts of bribery and obstruction of justice, theft/bribery concerning programs receiving federal funds, and wire fraud/theft of honest services. On September 4, 2003, McCarthy pleaded guilty to criminal charges for his role in this matter. McCarthy pleaded guilty to one charge of corruptly rewarding a public official. Under McCarthy's plea agreement, he may pay a criminal penalty of between $4,000-$40,000 and may be sentenced to between 15-21 months in prison.
Silvester, Stack (and his entity, KCATS), Thiesfield and two other parties (Landmark Partners, Inc. and its chairman, Stanley F. Alfeld) previously settled with the Commission in this matter. The Commission's case remains pending against three additional defendants: Spadoni; Ben F. Andrews, Jr.; and Jerome L. Wilson. For further information, please see Litigation Release Numbers 18436 (October 30, 2003), 16834 (December 19, 2000), and 16759 (October 10, 2000).