Cooperation with Spitzer, Then Handcuffs: Arrest a Thunderbolt to Sihpol

19 Corporate Crime Reporter 25(1), June 16, 2005

In August 2003, Bank of America broker Theodore Sihpol was called in for a talk with prosecutors from the office of New York Attorney General Eliot Spitzer.

“He went in and met with the Attorney General’s office,” said Sihpol's defense attorney, C. Evan Stewart. “He was told to cooperate and tell them what he knew. He did that. He was fully forthcoming and told them everything. And the next thing he knows, he was under arrest.”

“Ted Sihpol was a 35-year-old who had been at the Bank of America for a couple of years as a broker,” Stewart told Corporate Crime Reporter. “He was starting a career at a brokerage firm, had been at a trading desk and suddenly found himself out of the blue being arrested, being led in front of a bunch of television cameras in lower Manhattan with handcuffs on. This came out of the blue, just an extraordinary thunderbolt in his life. He didn’t know what to do.” (For a complete transcript of the interview, see Interview with C. Evan Stewart, 19 Corporate Crime Reporter 25(10), June 20, 2005, print edition only.)

Earlier this month, a jury found Sihpol not guilty on 29 counts related to alleged late trading of securities.

The jury deadlocked on four other counts – with one juror holding out for conviction.
Spitzer’s office has not yet said whether or not it would retry Sihpol on the remaining four counts.

“Ted Sihpol was the first person in the history of this country to be arrested and charged criminally with what has been called late trading of mutual funds,” said Stewart, a partner at the Brown Raysman law firm in New York City.“He was the first person to have been charged criminally with this, to be indicted for it. And the first person to go to trial over it.”

Bank of America paid $675 million and Canary Capital paid $40 million to settle allegations brought by Spitzer in the case. Neither company was charged criminally and neither admitted wrongdoing.

A number of Canary executives were given immunity from prosecution and cooperated with Spitzer in the prosecution of Sihpol.

“The Attorney General had complete discretion on who to charge and who not to charge,” Stewart said. “Why he chose the lowest guy on the totem pole and no one else – you would have to ask him.”

Sihpol’s attorneys argued at trial that what Spitzer called criminal late-trading was in fact accepted practice in the industry.

“If everyone knew what was going on, that is inconsistent with criminal activity,” Stewart said. “The basic facts were not in dispute. The activity was well known. And so the question is – if something is so well known, that is not consistent with someone trying to act in a furtive or criminal way. And the evidence was quite compelling that when Ted was doing this, he thought it was fine. And the evidence shows without a doubt that no one in two and half years ever said – Ted this is wrong, or Ted, this is a problem, or we ought to look into this.”

Stewart said that Spitzer made it clear publically prior to trial that any plea deal would involve jail time.

“And that was something for Ted, who never thought he did anything wrong, that was just not acceptable,” Stewart said.

“The single most important thing here is that it took enormous courage for Ted Sihpol to put himself through this, to put the government to its proof and let a jury decide his fate,” Stewart said. “That took enormous courage. He’s a very impressive fellow. I’m very proud of him and proud to be associated with him.”



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