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Bear Stearns, SEC settle
June 28, 1999: 3:28 p.m. ET

Investment bank agrees to pay $25M to settle fraud allegations
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NEW YORK (CNNfn) - Bear Stearns Inc. said Monday it agreed to pay $25 million in fines and penalties to resolve Securities and Exchange Commission charges that its clearing unit didn't report signs of fraud when it saw them.
     In an SEC filing, the brokerage's Bear Stearns Securities Corp. unit said it agreed to pay $5 million in fines and another $20 million in private claims to settle allegations that the unit knowingly processed and cleared fraudulent stock trades for A.R. Baron, a now-defunct New York-based securities firm, without reporting the activity to the SEC.
     If approved by the SEC, the settlement would end a two-year investigation into the Bear Stearns-A.R. Baron matter. The agreement will not have a material effect on the business or financial condition of Bear Stearns or its clearing unit, the three-sentence filing said. The SEC declined comment on the filing.
     The SEC began its investigation into Bear Stearns in May 1997 after A.R. Baron closed its doors following allegations of stock manipulation and unauthorized trades. At that time, the Manhattan District Attorney's Office charged the firm and 13 of its executives and brokers with defrauding investors of some $75 million. All 13 have subsequently either pleaded or have been found guilty of securities fraud.
     Bear Stearns garnered particular attention from investigators because its clearing unit processed and guaranteed trades for A.R. Baron, something the SEC argued Bear Stearns should be responsible for. SEC officials also said A.R. Baron would not have been able to persuade its investors to trust their actions without the Bear Stearns name behind them.
     In previous filings, Bear Stearns has denied that it is responsible for trades it clears and processes for other firms. A New York judge last year dismissed a suit filed by A.R. Baron's former customers against Bear Stearns, saying the investment bank was not liable for their losses.
     Monday's filing made no mention of Bear Stearns' admission of guilt or culpability. Officials at Bear Stearns had no comment on the allegations or the proposed settlement.
     The agreement may not end Bear Stearns' involvement with the SEC and alleged fraud concerning its clearing operations. According to the New York Times, the Manhattan District Attorney's Office also is investigating Bear Stearns in its capacity as the clearing firm for Sterling Foster and Rooney Pace, two other small brokerages.
     Sterling Foster, which was indicted by a grand jury last year for securities fraud, is said to have underwritten six small stocks that allegedly were secretly controlled by Randolph Pace, a principal of Rooney Pace, and processed through Bear Stearns Securities. Prosecutors are investigating that matter because the stocks allegedly were manipulated and because Randolph Pace, who also was indicted in the Sterling Foster case, was barred from the securities industry at the time, the Times report said.
     Bear Stearns stock was up 3 to 44-1/4 in Monday midday trading. Back to top


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