SEC Levies $153-Million Penalty on Fund Trader

The 51-year-old Calugar was accused of trading mutual fund shares after the markets had closed to take advantage of pricing trends, using phony time stamps to cover his tracks.

Regulators say he agreed to give up $103 million in ill-gotten gains and pay a $50-million fine -- the biggest hit to any individual in the nearly 2 1/2-year-old trading scandal. In addition, Calugar agreed in October to pay $72 million to settle a federal class-action lawsuit filed by mutual fund investors.

"The stupendous amount of Calugar's illegal profits, combined with the egregiousness of his conduct, fully supports our record penalty against him," said Randall R. Lee, director of the SEC's Los Angeles office, which handled the case.

Calugar neither admitted nor denied wrongdoing. He could not be reached for comment, and his attorney did not return calls.

Now a resident of Ponte Vedra Beach, Fla., Calugar owned homes in Los Angeles and Las Vegas when the SEC's case was filed in December 2003. At that time, the agency estimated his fortune at $550 million. That means he could be worth hundreds of millions of dollars even after he pays $225 million to regulators and investors.

Lee said Calugar's other riches apparently were unconnected to the mutual fund case, although he said that the SEC did not know where the trader's fortune originated.

Calugar had been a tax law specialist with an Atlanta firm before moving to Las Vegas in 1996, where he set up a company called Security Brokerage Inc. in a strip mall. The brokerage firm was formed as a vehicle for his own trades, the SEC said, and he had no outside clients.

From 2001 through 2003, Calugar allegedly pocketed $175 million through late trading and "market timing" schemes -- more than anyone else charged in the trading scandals that have scarred the $8.6-trillion fund industry since September 2003, according to the SEC.

Late trading is illegal and involves buying and selling mutual fund shares after the stock market has closed but still paying or receiving that day's prices. Most funds price once daily, at 4 p.m. Eastern time, and orders received after the close are supposed to be processed at the next day's share prices. Late traders exploit that system by purchasing shares of a foreign stock fund, for example, at a stale price after seeing an overseas run-up, then selling them the next day at a higher price.