RIDGEFIELD, Conn. -- A 46-year-old former executive in a Ridgefield-based hedge fund was sentenced Tuesday to 33 months in federal prison for his role in a scheme to defraud investors of $46 million.
Chief U.S. District Judge Janet C. Hall in New Haven also sentenced David Bryson, a former managing partner and principal of New Stream Capital, to three years of supervised release.
“In an effort to protect their own invested money and to collect more than $5.8 million in additional fees, New Stream executives devised and promoted a series of misrepresentations carefully calculated and designed to keep existing-investors in the dark about the true risk of the fund and to deceptively raise millions of dollars in new investments in an effort to keep their fund viable,” said First Assistant U.S. Attorney Michael J. Gustafson. “A prison term is an appropriate result for such criminal conduct.”
Cheryl Garcia, special agent in charge of the New York Office of Labor Racketeering and Fraud Investigations for the Office of Inspector General of the U.S. Department of Labor concurred.
“The defendants devised a fraudulent scheme to protect the assets of their largest client at the expense of their other investors,” said Garcia. “One of the investors deceived and victimized by the conspirators was an employer retirement trust covered by the Employee Retirement Income Security Act. Employees participating in the trust lost millions of dollars in retirement savings.”
According to court documents and statements made in court, in November 2007, New Stream Capital launched new feeder funds, one based in the United States and a series of funds based in the Cayman Islands.
New Stream also announced that its existing Bermuda Fund would be closing, and all foreign investors would have to move their investments into the Cayman Fund. Rather than transfer into the new structure, New Stream’s largest investor placed a redemption on its whole investment in the Bermuda Fund in March 2008.
At risk of losing their largest investor, Bryson, co-managing partner Bart Gutekunst and chief financial officer Richard Pereira set in motion a scheme to secretly keep the Bermuda Fund open and give priority to Bermuda Fund investors in an effort to reverse the redemption.
As part of the scheme, the three had New Stream staff secretly execute documents to effectuate the Bermuda Fund’s special priority.
New Stream failed to inform investors who had transferred from the Bermuda Fund into the Cayman Fund that the Bermuda Fund was remaining open or that it was being given priority over the Cayman Fund. Moreover, New Stream continued to market to investors by concealing from them the magnitude of the pending redemptions and by using deceptive marketing materials that failed to disclose the existence of New Stream’s Bermuda Fund.
From April 2008 to December 2010, Bryson collected more than $5 million in management fees and profit sharing while participating in this fraud.
On May 21, 2014, Bryson, Gutekunst and Pereira each pleaded guilty to conspiracy to commit wire fraud.
Gutekunst is scheduled to be sentenced on May 6 and Pereira on May 7.
Click here to sign up for Daily Voice's free daily emails and news alerts.