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Calugar Seeks Dismissal of Case

The investor claims the SEC's fund fraud suit fails to make relevant allegations.

March 12, 2004|Josh Friedman | Times Staff Writer

Daniel G. Calugar, the Las Vegas and Los Angeles resident accused of pocketing $175 million from improper mutual fund trading, has asked a federal court to throw out the civil fraud case.

In a filing released Thursday by the U.S. District Court in Las Vegas, Calugar said the Securities and Exchange Commission's "half-hearted" lawsuit failed to allege relevant violations.

Authorities claim that Calugar was one of the most successful practitioners of market timing and late trading, two of the abuses at the center of the scandal rocking the $7.5-trillion U.S. mutual fund industry.

The SEC's Dec. 23 lawsuit accuses him of making illegal or improper trades in funds run by Massachusetts Financial Services Inc. and Alliance Capital Management, calling his activities "a scheme to defraud mutual fund shareholders." Market timing refers to rapid in-and-out trading of fund shares and is not necessarily illegal. "Late" trades, or transactions executed at the old price after the market's close, are illegal, authorities say.

In his motion, Calugar said the "SEC has expressly recognized that market timing is not illegal." The motion also says the SEC never cites "any statute, rule or regulatory prohibition against 'late trading.' "

Both the SEC and Calugar's attorney declined to comment.

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