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Lazard Capital Management, ex-employees to pay $3 million over gifts to Fidelity traders

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 31, 2008

Fidelity’s funds have been terrible performers over the last several years, I wouldn’t give them a dime of mine to manage.

The Securities and Exchange Commission today charged privately-held, Lazard Capital Markets LLC, provides research, sales & trading, and underwriting in the areas of equity, fixed income and convertible securities with failing to supervise three employees who collectively spent more than $600,000 while improperly entertaining traders at Fidelity Investments in an effort to generate brokerage business.

Where as Lazard Capital Markets and four former employees have agreed to pay more than $3 million to resolve a federal complaint over lavish gifts the brokerage firm showered on Fidelity Investments employees to win the mutual fund company’s lucrative trading business.

The Securities and Exchange Commission said Thursday that LCM’s former head of Lazard Capital Markets’ U.S. sales and trading department David L. Tashjian and former registered representatives Robert A. Ward and W. Daniel Williams had consented to pay penalties in response to civil charges over more than $600,000 in gifts to Fidelity traders, including trips to such destinations as Europe, the Bahamas, the Caribbean, Florida, and Napa Valley, Calif., often by private plane, and paying for his meals and lodging at high-end restaurants and hotels.

Bruderman’s deal and a separate settlement regulators filed yesterday with New York broker-dealer firm Lazard Capital Markets, which allegedly paid for parts of the bachelor party, bring to an end some of the messiest loose ends of the Securities and Exchange Commission’s long-running investigation of the Fidelity gifts problem.

The probe began in late 2004 and centered on members of Fidelity’s vaunted stock trading desk and whether they were improperly steering business to brokerages that provided them with entertainment, trips, and other gifts. In previously released documents, the SEC said that more than 30 firms plied Fidelity traders with some $3 million worth of gifts.

In March, Fidelity agreed to an $8 million settlement to the case, but did not admit or deny wrongdoing. The SEC claims LCM and rival firm Jeffries Group spent $2.6 million between them on gifts – perks that apparently paid off. Fidelity Vice Chairman Peter Lynch also forked over $20,000 over charges that he got Fidelity’s trading desk to scare up concert and sports tickets for him.

Bruderman is the last of 13 current or former Fidelity employees to reach a preliminary settlement with the SEC. Neither David Bergers, the Boston SEC chief who led the investigation, nor Thomas Kiley, Bruderman’s lawyer, would describe the terms of the preliminary settlement, which still requires approval from Washington. Kiley said his client still takes the positions he took in a past filing in which he denied wrongdoing and stated he followed Fidelity policies. Bruderman left Fidelity in December 2004.

George Curtis, deputy director of the SEC’s enforcement division, said: “Fund managers owe their loyalty and allegiance solely to the funds and their investors. When brokers provide mutual fund traders with prohibited travel, entertainment and gifts, it may impair their objective judgment and harm investors.”

LCM said: “This matter related to activities conducted years ago by former employees. LCM does not tolerate inappropriate behavior, and we impose sanctions as a result. We cooperated fully with the SEC in its investigation.”

Note: Post has been re-edited on Judi Frost Mackey- SVP and Director, Global Communications (Lazard)’s request by editor.

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