William Daniel Williams III, a Lazard Frères & Co. capital markets executive, left the firm early last month. His departure coincided with an inquiry by two regulatory agencies into whether Lazard and other brokerage firms gave gifts to mutual fund traders in exchange for their directing trades to those firms. The widening scandal has already prompted the disciplining of several traders at giant mutual fund house Fidelity Investments.
Williams, known as Danny, was an equity sales-trader who covered Fidelity for Lazard. It could not be determined whether he is in fact targeted in the probes by the Securities and Exchange Commission and NASD, which began last year and are still in the early stages.
A Lazard spokesman confirmed that Williams no longer works for the firm but declined further comment. Neither the SEC nor NASD would comment on the matter, in keeping with their policies regarding ongoing investigations, and Williams could not be reached despite repeated attempts.
Investigators are seeking to determine whether mutual fund traders channeled orders to certain brokerages in return for golf junkets, sports tickets and other blandishments. By law, funds are supposed to place orders on the basis of which firms offer the best execution for fund shareholders. And regulations state that traders are prohibited from accepting gifts valued in excess of $100.
Lazard, in the prospectus for its impending IPO (see story, page 46), acknowledges that the firm has received a letter from NASD and a subpoena from the SEC “seeking information concerning gifts and entertainment involving a mutual fund company.” The statement adds, “We believe that other broker-dealers have received similar subpoenas.”
In December, Fidelity took disciplinary action, including levying fines, against 14 of its traders and said that two additional traders had left the firm following an internal investigation that turned up violations of Fidelity’s policy against accepting gifts from brokerage officials. Since then three other traders have departed Fidelity. The firm declined to identify any of the traders who left or to comment on the reasons for their departures. A firm spokeswoman declined further comment.
One event that investigators apparently are looking into is a summer 2003 bachelor party for Fidelity trader Thomas Bruderman, who was about to marry Sandra Kozlowski, the daughter of disgraced former Tyco International CEO Dennis Kozlowski. People familiar with the Miami party, which supposedly featured adult entertainment, say that a number of brokerage houses helped to underwrite the festivities. -- Justin Schack
