Compliance December 29, 2006

UnumProvident Exec Pleads Guilty to Fraud

The US Attorney for the Western District of Tennessee has announced James Michael Foley, former Vice President of Sales for UnumProvident Corporation, pled guilty on Friday to fraud in relation to sales of insurance to corporations.
Reported by
According to a US Department of Justice news release, Foley sold policies to approximately 10 client companies directly that were not considered commission policies, yet caused the underwriting department of UnumProvident to name a friend as the broker of record on the policy at a certain commission level, though there was actually no broker involved. Foley received 90% of the commission paid to his friend and would alter paperwork furnished to the client by removing the name of the broker and the amount of the commission paid.

The release said, because of this scheme, Foley caused losses to UnumProvident of over $6 million. Foley also pled guilty to making false statements on and knowingly covering up and failing to disclose facts on a document, with respect to a policy with Helena Chemical Company.

Foley faces a maximum penalty of 25 years in prison and a $500,000 fine when sentenced.
The Markets December 29, 2006

Evergreen Settles With NASD for $4.2M

Evergreen Investments, a unit of Wachovia Corporation, agreed to pay a $4.2 million civil penalty to settle National Association of Securities Dealers (NASD) allegations that it adopted improper mutual fund sales methods.
Reported by
Reuters reports the NASD investigation, which lasted more than a year, probed whether Evergreen’s affiliated mutual fund broker-dealer, Evergreen Investment Services, made inappropriate, non-cash compensation to brokers for sales of Evergreen funds between 2001 and 2003. According to the regulator, in exchange for receiving better placement in front of customers and on Web sites and receiving better treatment from Wachovia’s financial advisers, Evergreen directed commisions to Wachovia’s brokerage unit. NASD also investigated if Evergreen sent more business during that period to some broker-dealers who were promoting its funds.

Evergreen Chief Executive Dennis Ferro said in a statement no shareholders or mutual funds will be affected monetarily or in any other way as a result of the settlement. He also said the company believes no fund or shareholder was adversely affected by the conduct NASD was investigating. Evergreen did not admit to or deny any wrongdoing.

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