SEC charges Dreyfus fund chief with fraud
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WASHINGTON — Dreyfus fund director Martin Fife was charged by the Securities and Exchange Commission (SEC) with participating in a $52 million fraud in which investors were promised high returns on Treasury bills.
The SEC alleged that Fife, 75, and others guaranteed returns as high as 300 percent in 12 banking days on a limited trading program that actually produced substantial losses.
Fife, who serves on the boards of 14 Dreyfus funds in New York, ran the Brite Business trading program that bought Treasury bills on margin and invested in Mexican shrimp farms and housing projects in India, the SEC said.
"Mr. Fife is not an employee of the corporation," Dreyfus spokeswoman Patrice Kozlowski said. "He is an independent fund director, and importantly, neither the corporation nor the Dreyfus funds have any connection whatsoever to the allegations in the SEC complaint."
The defendants used investor funds to return $32 million to early investors while keeping $20 million for themselves in a Raymond James Financial Services account in Cranston, R.I., the SEC alleged. Five investors, including Four-Star Financial Services in California, Trigon Capital and Beehive International, were defrauded between 1999 and 2001, the suit contended. Raymond James wasn't accused of wrongdoing.
Among the Dreyfus funds Fife helps oversee are Dreyfus Liquid Assets, a $6.96 billion money-market fund; Dreyfus Fund, a $1.81 billion stock fund; and Dreyfus Municipal Income Fund, a $295 million closed-end fund.
"Fife was an integral part of the fraud," said Juan Marcelino, head of the SEC's Boston office. "He allowed himself to be billed as a master trader to lure investors."
Fife was joined in the scheme, the suit alleged, by Dennis Herula, who was a broker for Raymond James until being fired in January 2001, SEC officials said. Also participating were Herula's wife, Rhode Island attorney Mary Lee Capalbo; Charles Sullivan, a New York lawyer whose family used to own the New England Patriots professional football team; and British citizen Michael Clarke.
The defendants couldn't be reached for comment.
Herula and Capalbo have placed their $5.5 million house on the market and tried to transfer money to offshore accounts in an attempt to dissipate assets, the SEC alleged.
A Providence, R.I. federal court entered temporary restraining orders and asset freezes against Fife and others in connection with the charges.