Thu 19 Aug 2004
Van Eck is an investment firm that is in a bit of trouble with the authorities.
Mutual fund company Van Eck Worldwide says securities regulators are considering filing an enforcement action against it for permitting abusive trading in some of its funds.
The fund company made the announcement in a corporate filing late Thursday and said it is considering how to respond to the so-called Wells notice from the Securities and Exchange Commission.
See here for an overview of the scandal. Quick summary: Mutual fund companies, like Van Eck, let hedge funds do various sorts of rapid trading that hurt long term investors. The most amusing commentary is often at FundAlarm. He noted problems at Van Eck almost a year ago.
For those of you who are keeping a scandal scorecard, you might want to pencil in the Van Eck funds…..Van Eck has apparently been subpoenaed by Eliot Spitzer’s office, and it hasn’t been charged with anything yet, but the evidence of guilt is compelling: For 2002, Van Eck International Gold A experienced almost $2 billion in matching sales and redemptions, on an asset base of about $170 million — the surest test yet devised for market-timing activity…..It looks like Van Eck Global Hard Assets A also played host to market timers, along with three annuity funds in the Van Eck Worldwide Insurance series (Emerging Markets, Real Estate, and Hard Assets).
The only reason that this story is of interest to EphBlog is that firm founder, John Van Eck ’36 and his son Derek Van Eck ’86 are both Ephs. As a side note, Derek’s brother Jan (’85) is still listed as being part of the family firm in the alumni directory even though he does not appear as one of the firms investment professionals.
Alas, I think that this is a recent change. Jan does appear in reference to various hedge fund activities at Van Eck. It seems like Jan was involved with precisely those aspects of the firms operations that the SEC is now most concerned about. Van Eck Worldwide, in its corporate filings, indicates that two of its “senior officers” are a focus of the SEC investigation.
My quess: the SEC will come after Van Eck Worldwide and Jan Van Eck will have to leave (or has left) the company. There will be civil, but no criminal, charges. Van Eck will pay a hefty fine without admitting or denying wrong doing.
Of course, it is impossible to know, from the outside, what really happened at Van Eck and who, if anyone, is to blame. I knew Jan at Williams, albeit much less well than I knew Derek. He seemed a good guy then and, I suspect that he is a good guy now.
But good guys sometimes do bad things. The lesson for younger Ephs out there is that there are few places to hide in an increasingly transparent world. Best to conduct yourself as if everything you say and do in the business world is or will be public knowledge.
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