A former top executive of the failed Connecticut hedge fund firm New Stream Capital LLC was sentenced on Tuesday to 2-3/4 years in prison, after pleading guilty to conspiring to defraud clients as the 2008 financial crisis approached.
Former managing partner David Bryson had pleaded guilty last May to a charge of conspiracy to commit wire fraud.
Federal prosecutors had accused him and two co-defendants of helping conceal changes in the capital structure of one of New Stream's funds, to avoid losing the Ridgefield, Connecticut-based firm's largest investor.
Authorities said New Stream was once a $750 million firm that specialized in investments such as loans backed by real estate and life insurance contracts. It filed for bankruptcy protection in March 2011.
Bryson was sentenced by Chief Judge Janet Hall of the federal court in New Haven, Connecticut, in a hearing that lasted nearly seven hours, court records show.
Prosecutors had sought a five-year prison term, while Bryson sought no prison time. Restitution has yet to be set.
In a letter to the judge, Bryson took "full responsibility" for his actions, and expressed remorse for the suffering he caused for his institutional clients, co-workers and family.
A lawyer for Bryson was not immediately available for comment.
Prosecutors said that in 2007, New Stream told foreign investors that their Bermuda fund would be closing, and that they needed to move their money into new Cayman Islands funds.
But when Gottex Fund Management decided in March 2008 to redeem its $300 million stake in the Bermuda fund, New Stream secretly decided to keep that fund open and reorganize its capital structure to give priority to its investors over investors in other New Stream funds, authorities said.
New Stream stopped returning money to investors during the financial crisis, after receiving $545 million of redemption requests by the end of Sept. 2008, the U.S. Securities and Exchange Commission said in a related civil lawsuit.
The other New Stream defendants, former managing partner Bart Gutekunst and former Chief Financial Officer Richard Pereira, also pleaded guilty to conspiracy and were scheduled to be sentenced this week. Prosecutors want five years in prison for Gutekunst and three to four years for Pereira. Both defendants say no prison time is warranted.
The case is U.S. v. Bryson et al, U.S. District Court, District of Connecticut, No. 13-cr-00041.
