WEST PALM BEACH, FL (HEDGECO.NET) – Edward Strafaci, a former executive vice president and trader at Lipper Holdings LLC has pleaded guilty to fraud charges, brought against him by the Securities andExchange Commission. Strafaci admitted that between 1996 and 2002, he inflated the prices of securities in the Lipper Convertible Funds, valued then at US$722 million.<\/p>\n
Investors in the Lipper Convertible funds believed that their assets in the vehicle were growing at the rate of 9-15% during the years of 1995-2000. Those investors actually lost money when the Lipper convertible portfolio was folded as a result of significant devaluation, resulting from the inflated prices by Strafaci.<\/p>\n
According to Lipper, those losses were incurred in two portfolios; Lipper Convertibles, L.P., and Lipper Offshore convertibles. Lipper explained that, \u00c3\u00af\u00c2\u00bf\u00c2\u00bdCalifornia energy crises, the decline of telecom, September 11, Enron fallout, recession and \u00c3\u00af\u00c2\u00bf\u00c2\u00bdwar\u00c3\u00af\u00c2\u00bf\u00c2\u00bd status-have impacted the financial markets, and Lipper\u00c3\u00af\u00c2\u00bf\u00c2\u00bds portfolio of convertible securities.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd<\/p>\n
Lipper further said that \u00c3\u00af\u00c2\u00bf\u00c2\u00bdThese events have had the most profound impact on current market value of our portfolio securities, in the airline, hotel, leisure, tourism, energy and electric generating industries, and a serious secondary impact on the general liquidity of long dated securities, which in keeping with our income orientation; comprise a substantial portion of our convertible arbitrage portfolio.\u00c3\u00af\u00c2\u00bf\u00c2\u00bd<\/p>\n
As a result of the review, the Lipper Convertibles, L.P. had a net reduction of $400m, while the Lipper Offshore Convertibles was reduced by $148m, as at 31 December 2001. According to court papers, Strafaci will be sentenced on December 2, in the Manhattan federal court. He could get up to 10 years in prison for this offense.<\/p>\n
Paul Oranika
Editor-in-Chief
HedgeCo.Net
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