Nov. 18–Janus International chief executive Richard Garland resigned on Monday, the latest head to roll in a widening probe over mutual-fund trading agreements that hurt small investors.
Denver-based Janus Capital Group offered no formal explanation of why Garland left, in a statement equally lacking in praise for a hard-charging executive who built up $5.9 billion in overseas assets for the group.
“Both Janus and Mr. Garland came to the view that it would be best if he left the company,” Janus spokesman Blair Johnson said. “We have accepted his resignation.” The Post was unable reach Garland, 42, who worked out of a Janus office in Westport, Conn.
Garland was front and center of a market-timing scandal that enveloped Janus and three other mutual-fund groups in early September.
New York Attorney General Eliot Spitzer pointed out that Janus had allowed a New Jersey hedge fund, Canary Capital, to make short-term trades in the Janus High Yield and Mercury funds.
“They felt there was enough pressure and enough justification and they ran enough reputation risk that they couldn’t keep Mr. Garland on,” said Jeff Keil, vice president of global fiduciary review with Lipper, a financial information firm, in Denver.
Market timers like Canary were allowed to trade quickly in and out of mutual funds, skimming returns that might have otherwise gone to long-term investors and adding costs.
Despite an official policy that discouraged short-term trading, Janus admits to 12 timing agreements in its U.S.-based funds and an undisclosed number in its offshore funds.
In damaging e-mails that Spitzer released as part of his Canary probe, Garland appears to have condoned the practice despite the concerns of others under his command.
“I have no interest in building a business around market timers, but at the same time I do not want to turn away ($10 million to $20 million)!” Garland wrote in an April e-mail.
Janus initially defended Garland based on the fact that the market-timing deal discussed in the Spitzer e-mails was never acted on.
But last week the firm admitted it had uncovered additional market-timing agreements in its overseas funds.
“It seemed obvious from Mr. Spitzer’s documentation that he (Garland) was aware of the timing that was going on,” Keil said.
Earlier this year, Garland became managing director of Janus Global Adviser, which made him responsible for sales to broker-dealers and independent financial advisers worldwide.
Janus Global Adviser would have probably been a channel for timing agreements.
Janus Global Adviser’s vice president and national director Erich Gerth will replace Garland as senior vice president and managing director.
Gerth joined Janus in July from Goldman Sachs Asset Management and will report directly to Janus Capital Group CEO Mark Whiston.
Gerth also will oversee the international institutional sales that Garland ran, but will not take the title of CEO of Janus International.
More than 40 mutual-fund industry executives have either been fired, forced to resign or suspended because of their involvement in late trading or market timing, according to Bloomberg News.
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