16 October 2004 LAWFUEL – Law, crime, legal, attorney, law firm newsMarcos Daniel Jiménez, United States Attorney for the Southern District of Florida;
Michael S. Clemens, Special Agent in Charge, Federal Bureau of Investigation;
Stephen M. Cutler, Director, Division of Enforcement, United States Securities and
Exchange Commission, Washington, D.C.; Dave Nelson, Regional Director, Securities
and Exchange Commission, Miami, Florida; Don Saxon, Commissioner, Office of
Financial Regulation, State of Florida; and Michael S. Reiter, Chief, Palm Beach
Police Department, announced today that defendant, Kautilya Sharma, a/k/a “Tony
Sharma,” was sentenced before United States District Court Judge Kenneth Marra in
the case styled as United States v. Charles J. Kerns, Sr., et al., Case Number
03-80146-Cr-Marra. Judge Marra sentenced Sharma to a term of fifty-eight (58)
months’ imprisonment and a term of three (3) years’ supervised release and entered
an asset forfeiture judgment of $1.3 million against Sharma.
The convictions of Sharma and his co-defendant, Neal Wadwha, are believed to be the
first federal court criminal convictions for illegal mutual fund “market timing”
and “late trading” in the nation. “Market timing” refers to the practice of short
term buying and selling of mutual fund shares in order to exploit inefficiencies in
mutual fund pricing. “Late trading” refers to the practice of placing orders to buy
or sell mutual fund shares after the close of the market at 4:00 p.m. EST, but
paying the price as of the 4:00 p.m. EST close. “Late trading” typically enables
the trader to gain an advantage by capitalizing on news and information that occurs
after 4:00 p.m. Otherwise put, the late trader profits from market events that
occur after the 4:00 p.m. EST market close, but that are not reflected in that
day’s closing price.
Sharma and Wadwha were convicted of conspiring to engage in illegal mutual fund
trading. On July 27, 2004, Sharma pleaded guilty to two (2) counts of the Second
Superceding Indictment. Those counts were count 28, which charged Sharma with
conspiracy to commit mutual fund “market timing” and “late trading,” as well as
count 20, which charged Sharma with conspiracy to sell unregistered securities. On
July 28, 2004, the day after Sharma’s guilty plea, Wadwha pleaded guilty to the
conspiracy to commit mutual fund “market timing” and “late trading” count. Wadhwa
faces a maximum statutory sentence of five (5) years in prison. His sentencing
hearing is scheduled for December 10, 2004 at 10:00 a.m. before Judge Marra.
The three (3) other individual defendants and the two (2) corporations also have
been convicted. On June 23, 2004, co-defendant, Brett Dohner, pleaded guilty to
one (1) count of conspiring to commit securities fraud and one (1) count of
securities fraud in connection with a charged stock loan scheme. Dohner faces a
maximum statutory sentence of five (5) years in prison on the conspiracy fraud
count and twenty (20) years in prison on the securities fraud count. His
sentencing hearing is set for December 10, 2004 at 10:00 a.m. before Judge Marra.
On August 16, 2004, co-defendant, Lewis Hodge, pleaded guilty to one (1) count of
conspiring to commit securities fraud in connection with the stock loan scheme.
Hodge faces a maximum statutory term of five (5) years in prison. His sentencing
hearing is set for November 2, 2004 at 11:00 a.m. before Judge Marra.
On September 2, 2004, co-defendant, Charles J. Kerns, Sr., was convicted at trial.
A federal jury in Fort Lauderdale found Kerns guilty on seventeen (17) counts of a
total of nineteen (19) counts of the Third Superseding Indictment, namely, one (1)
count of conspiring to commit securities and wire fraud, nine (9) counts of
securities fraud, six (6) counts of wire fraud, and one (1) count of money
laundering.
Mr. Jiménez commended the investigative efforts of the Federal Bureau of
Investigation, United States Securities and Exchange Commission, Palm Beach Police
Department, and State of Florida, Office of Financial Regulation. This case is
being prosecuted by Assistant United States Attorney Emalyn H. Webber, Special
Assistant United States Attorney James M. Fay, and Colleen Conry, Trial Attorney,
United States Department of Justice, Frauds Section.
A copy of this press release may be found on the website of the United States
Attorney’s Office for the Southern District of Florida at www.usdoj.gov/usao/fls
found on the website of the District Court for the Southern District of Florida at
www.flsd.uscourts.gov
