Pasadena bond investment firm Western Asset Management Co. will pay $21 million to settle an investigation by the Securities and Exchange Commission and the Department of Labor over improper trades made between 2007 and 2009.
Under the settlement announced last week, Western Asset will pay $17.4 million to employee benefit plan funds that lost money because of the trades and an additional $3.6 million in penalties to the federal agencies. Western Asset is part of publicly traded Baltimore investment firm Legg Mason Inc.
Between 2007 and 2009, Western Asset improperly bought about $90 million in debt securities on behalf of private pension funds the firm managed. The federal Employee Retirement Income Security Act prohibits pension funds from investing in certain securities, including the type purchased by the firm.
But the trades went through because a computer program incorrectly identified the securities as being eligible for purchase by pension accounts, according to the settlement agreement. Officials at Western Asset noticed the problem in 2008 but didn’t notify investors at that time. The firm sold the securities in 2009 at a significant loss.
Federal investigators also found that Western Asset engaged in cross-trading, the practice of selling securities to a broker then buying the same security back, with a markup, on behalf of a different client. Such transactions are prohibited by some pension funds.
What’s more, some of the cross-trading was done with accounts Western Asset was managing for the Public-Private Investment Program, part of the Treasury’s Troubled Asset Relief Program, according to a statement by TARP’s special inspector general. The firm was prohibited from cross-trades involving that program.
In a statement, Western Asset said it was not admitting wrongdoing but was glad to have the matter settled.
“These resolutions represent negotiated settlements of the outstanding matters in which Western neither admits nor denies the charges,” the statement read. “Western chose to settle the matters to avoid the uncertainty, expense and distraction of litigation.”
The statement also noted that most of the settlement payments will be covered by insurance.
Mary Athridge, a spokeswoman for Legg Mason, said that Western Asset has amended its trading processes in the past few years and that the firm now has more formal processes for reviewing potential investments.
Westwood business management firm Nigro Karlin Segal & Feldstein has added yet another name to its door, that of partner David Bolno. The firm is now Nigro Karlin Segal Feldstein & Bolno.
Nigro Karlin offers tax and business management services for celebrities and the wealthy. Bolno joined the firm in 2005 and became a partner in 2011. He specializes in managing clients in the music business and co-founded Nigro Karlin’s sports business, which works with pro athletes.
Adding Bolno’s name is the second big change for the firm in the past few months. In September, First Republic Bank in San Francisco bought a minority stake in Nigro Karlin. Financial terms of the deal were not disclosed.
JPMorgan Chase Bank already had more Los Angeles County branches than any other lender and last month it opened eight more. The New York bank now has 299 locations here, up from zero before it acquired failed lender Washington Mutual in 2008.
Last month, it opened branches in South Gate, Gardena, Diamond Bar, Torrance, Culver City, Wilmington, West Hollywood and downtown Los Angeles, putting a Chase sign atop the high-rise at Wilshire Boulevard and Bixel Street.
With nearly 300 branches, Chase now has about 50 more than Bank of America, which has more deposits in the county than any other bank. Chase has about 9 percent of the county’s total deposits. Bank of America has 22 percent.
Kathryn Gonzales has joined Farmers & Merchants Bank of Long Beach as chief banking officer, a new position at the 107-year-old lender. Gonzales had been senior vice president of retail banking at Provident Bank in Riverside. … Kevin Finch has joined downtown L.A. asset manager TCW Group Inc. as associated general counsel. He had been a partner at Century City law firm Freeman Freeman & Smiley. … Sinan Sinanian has joined EH National Bank in Beverly Hills as a board member. He is one of the co-founders of Tarzana contractor Sinanian Development Inc.
Staff reporter James Rufus Koren can be reached at email@example.com or (323) 549-5225, ext. 225.
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