Separately, on Sept. 30, 2005, the Commission also filed a complaint in the United States District Court for the Eastern District of New York against one of the broker-dealers and two of its associated persons through which IEA and Lund traded in cloned accounts. Named in the complaint are Ehrenkrantz King Nussbaum, Inc.(EKN), a registered broker- dealer located in Garden
City, N.Y.
, Anthony Ottimo, EKN’s Chief
Executive Officer and a registered representative of the firm, and Brendan E. Murray, an unregistered associate of EKN. The complaint alleges that EKN, Ottimo, and Murray (collectively, the defendants) engaged in a scheme to defraud at least nine mutual fund companies for the purpose of enabling IEA and Lund, as well as three other customers, to place hundreds of illegal market timing orders in the funds without alerting the mutual funds to their activities. The complaint further alleges that the defendants, among other things, used cloned accounts to make it appear as if all the mutual fund orders being submitted by defendants’ market timing customers were coming from many different EKN customers, trading through numerous EKN branch offices, and being assisted by many different EKN registered representatives. In fact, all of the market timing orders were being submitted by only four EKN market timing customers. Further, all four of these customers did business only through EKN’s Garden City, New York office, and were being assisted by only one EKN registered representative, Ottimo. By their conduct, EKN, Ottimo, and Murray deceived the mutual funds through which their customers market timed and caused those mutual funds to process trades they otherwise would have rejected. EKN, Ottimo and Murray received approximately $230,000 in commissions and fees from their market timing customers. The complaint also alleges that EKN transacted in securities through an unregistered associated person, namely, Murray, and that Ottimo and Murray aided and abetted that conduct of EKN.