Ifrah Law and Harris, Cutler & Houghteling LLP Win Victory for Defendant in SEC Fraud Case
December 19, 2011
Washington D.C., December 16, 2011 — Ifrah Law and Harris, Cutler & Houghteling LLP today announced that former Prudential Securities broker, Frederick J. O’Meally has been exonerated of fraud charges brought by the Securities and Exchange Commission (SEC) after a four- week long trial in New York City before the Honorable Laura Taylor Swain in the United States District Court for the Southern District of New York.
Mr. O’Meally, who was a broker for Prudential Securities from 1994 until 2003 and worked primarily with hedge fund clients who invested millions of dollars in mutual funds using “market timing” strategies, was charged by the SEC in 2006 with fraud and negligence allegations. Three co-defendants and Prudential Securities, in a separate action brought by the SEC, all settled charges. Mr. O’Meally refused to settle, and argued that his business practices were approved by Prudential Securities management and its in-house counsel.
The SEC alleged that Mr. O’Meally defrauded 60 different mutual fund families in whose funds he traded on behalf of his market timing clients between 2001 and 2003, in violation of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and in violation of Section 17(a) (1), (2) and (3) of the Securities Act of 1933. The SEC acknowledged that market timing per se was not illegal, but asserted that O’Meally committed fraud by deceiving mutual fund companies that were trying to exclude his market timing trading from their funds.
The eight-member jury deliberated for two days and found against the SEC on all fraud counts, concluding that Mr. O’Meally had committed no intentional wrongdoing. The jury found that Mr. O’Meally had been negligent in his trading with 6 of the 60 funds. With respect to the other 54 funds they found in favor of Mr. O’Meally. Mr. O’Meally was represented by Jonathan Harris, partner with Harris, Cutler & Houghteling and David Deitch of Ifrah Law who acted as co-lead trial counsel.
Judge Swain previously reserved a ruling on a defense motion for judgment as a matter of law on the negligence claim. A decision on this issue is not expected until early 2012. A favorable decision by the judge would mean that the only portion of the jury verdict favoring the SEC would be thrown out.
“I am extremely pleased with the outcome of this case against Mr. O’Meally, who did not intend to deceive anyone and defrauded no one, and represented his clients with integrity and professionalism throughout his career,” stated David Deitch, partner with Ifrah Law. “Mr. Harris and I are continuing our efforts to persuade the court to further exonerate Mr. O’Meally of the negligence claim as well.”
Jonathan Harris, partner with Harris, Cutler & Houghteling, who has represented Mr. O’Meally since the beginning of the market timing investigations in 2003, commented, “Throughout the SEC’s lengthy investigation, we have consistently represented that Mr. O’Meally’s business conduct was always in good faith. This outcome is very gratifying and demonstrates that Mr. O’Meally committed no intentional wrongdoing. Mr. O’Meally is glad the trial is over and he can now devote his full attention to running his hedge fund, Kismet Capital Advisors.”
In addition to Mr. Harris, the Harris, Cutler & Houghteling team included Julie Withers and Alexander Sakin.
For the Reuters Article, click here.
For the Law360 Article, click here.