REGULATORY

PIMCO ENTITIES TO PAY $50 MILLION TO SETTLE FRAUD CHARGES

Three companies have agreed to pay $50 million to settle charges they defrauded investors in Pimco Funds by not disclosing a market-timing arrangement. In return, the Securities and Exchange Commission agreed to drop a lawsuit it filed in May against the companies, PA Fund Management LLC, PEA Capital LLC and PA Distributors LLC. Under the settlement, the companies did not admit or deny the SEC charges, but consented to cease-and-desist orders, censures, and to undertake compliance and mutual fund governance reforms. The settlement, consisting of a $40 million penalty and $10 million disgorgement of ill-gotten gains, is to be distributed to shareholders whose funds were affected by a market-timing arrangement, which the SEC said was illegal to not disclose. PEA Capital said its investigation found that only one fund, PEA Growth, experienced any harm, in an amount less than $1 million. In February, PEA Capital reimbursed $1.6 million to shareholders in that fund and three others that Canary had invested in, representing damages and some management fees.

– Associated Press

NATIONAL

LAWYERS FOR FORMER BANKER QUATTRONE TRY TO SEAL LETTERS

Lawyers for former star banker Frank Quattrone yesterday accused the judge who sentenced him to prison for 18 months of a “stunning display of judicial callousness and insensitivity” for letting his family’s medical problems become public. In papers filed with the 2nd U.S. Circuit Court of Appeals, the lawyers asked the appeals court in Manhattan to issue an immediate order blocking release of sentencing letters while it decides the issue. Quattrone, 48, was sentenced last week for his obstruction-of-justice conviction and ordered to report to prison in 50 days. Defense lawyer Mark Pomerantz, who signed the papers filed with the appeals court Monday, predicted immediately after sentencing that Quattrone’s appeal prospects were strong enough that he may never serve a day in prison. At sentencing, U.S. District Judge Richard Owen rejected Quattrone’s plea for leniency on the grounds he needed to care for his chronically ill wife and his 15-year-old daughter, who defense lawyers said had psychological problems. The judge also refused to seal some of the 500 letters submitted before sentencing, including 79 letters the defense contends contain information about the medical and psychological conditions of Quattrone’s wife and daughter. “The judge’s offhanded, cavalier dismissal of the problems of both petitioner’s wife and daughter represents a stunning display of judicial callousness and insensitivity,” Pomerantz wrote. Messages left with the judge’s chambers and a spokeswoman for federal prosecutors were not immediately returned Monday.

– Associated Press

ROY DISNEY ASKS DISNEY BOARD TO SEARCH FOR NEW CHIEF

Roy Disney and Stanley Gold, two former Walt Disney Co. directors, asked the company’s board to hire an executive search firm to replace Disney Chief Executive Officer Michael Eisner before he steps down in 2006.

Messrs. Disney and Gold made their demand in a letter to the company’s board, a copy of which was e-mailed to Bloomberg News. Eisner said Friday that he would retire in 2006 from Burbank, Calif.-based Disney.

Messrs. Disney and Gold have been seeking to oust Mr. Eisner since last year, when the two stepped down from the board and begin a public campaign to remove the CEO. Mr. Eisner relinquished his chairman’s post to former U.S. Senator George Mitchell after investors withheld 45% of shares voted for Mr. Eisner’s re-election to the board. “It is intolerable for Michael Eisner to continue to hold the company hostage for two more years – and perhaps longer,” the two dissidents said in the letter.

– Bloomberg News