Bank of America fires two executives

Bank of America Corp. fired two New York executives accused by New York Attorney General Eliot Spitzer of allowing a hedge fund to engage in improper trading in the bank's mutual funds, people familiar with the situation said.

Bank of America, the third-largest U.S. bank by assets, dismissed Charles Bryceland, 34, who ran its New York brokerage office for wealthy clients, and broker Theodore Sihpol, 35, who built a relationship with Canary Capital Partners LLC.


Spitzer said they let Canary Capital engage in so-called market timing and after-hours trading in return for investing with the bank.

The firings are the first prompted by Spitzer's accusation that "illegal trading schemes" enabled hedge funds to buy mutual fund shares at prices not available to most investors.


After disclosure of the problem, Kenneth Lewis, chief executive officer of the Charlotte, N.C.-based bank, said he would "hold accountable" workers responsible for allowing the trading.

"Letting people go is like admitting you have an internal problem," said Wayne Bopp, who helps manage $30 billion at Fifth Third Bancorp in Cincinnati, which holds shares of Bank of America. "Maybe there's other stuff we don't know about, or this has been going on longer than we thought."

Bryceland and Sihpol were among four bank employees Spitzer said were involved in developing the Canary relationship. The others named were Richard DeMartini, 50, president of all the bank's asset management businesses, and Robert Gordon, 42, chief executive of Banc of America Capital Management.

Bank spokesman Robert Stickler declined to discuss the fate of DeMartini and Gordon and declined to comment on Sihpol and Bryceland.

Sihpol would not comment when contacted by telephone at his home in New Canaan, Conn. DeMartini's assistant referred the call to a bank spokesman. Gordon didn't return a voice-mail message left in his New York office and Bryceland didn't return messages left at his home and office.

Lewis increased pressure on the bank's New York-based asset-management unit this year when he said he wanted to triple the division's contribution to earnings to 15 percent in the next three to five years.

Bank of America, operator of the second-biggest bank-owned group of mutual funds after Bank One Corp., had $315 billion under management at the end of June. The business earned $144 million in the second quarter, about 5.3 percent of the company's total profit.

Canary was allowed to engage in late trading and "market timing," Spitzer alleged.


U.S. mutual funds shares are valued daily at 4 p.m. New York time. Investors who trade after the deadline can take advantage of market-moving information as much as 24 hours before the shares are valued again. Federal and state laws bar the practice.

Market timing, in which investors can buy a mutual fund's shares one day and sell the next, allows them to take advantage of anticipated changes in share values by exploiting gaps in how they are set.

In a $40 million settlement with Canary Capital, Spitzer alleged that Bank of America, Bank One, Janus Capital Group Inc. and Strong Capital Management Inc. gave the hedge fund access to mutual fund prices that weren't available to other investors. "If in fact these allegations are true, I would fix the people issues and the procedures," Lewis recently told reporters.