A federal jury in Manhattan absolved investing pioneer Bruce Bent and his son Bruce Bent II of securities fraud on Monday. The verdict, which came after a month-long trial, is a win for Duane Morris and a blow to the U.S. Securities and Exchange Commission in one of its few attempts to hold individuals culpable for the financial crisis. The SEC brought a civil complaint against the Bents in 2009, alleging that they misled investors about the health of their flagship $62 billion money market fund, the Reserve Primary Fund. The fund “broke the buck”–i.e., fell below the sacred $1 per share mark–on Sept. 16, 2008, the day after Lehman Brothers declared bankruptcy. Lehman’s collapse wiped out $785 million of the Primary Reserve Fund’s assets. Shareholders got spooked and started to redeem their shares en masse. According to the SEC’s complaint, the Bents made false statements on Sept. 15 and Sept. 16 about the fund’s liquidity, “plac[ing] their own financial and reputations interests ahead of the Fund and its shareholders.” John Dellaportas of Duane Morris stepped in to represent the Bents. During the trial, which was halted because of tropical storm Sandy, he argued that his clients, like most people, underestimated the gravity of the financial crisis. As The Wall Street Journal reported, Dellaportas made the storm a theme in his closing, likening it to the economic maelstrom the Bents faced in 2008. “Everything that could go wrong did go wrong,” he said of the two-day window in September 2008 that landed his clients in hot water with regulators. “The SEC is trying to blame us for a crisis they themselves didn’t foresee.” Bent Sr., who is credited with launching the first money market fund in 1970, has now weathered yet another storm. After two and a half days of deliberation, a jury rejected all six charges against him. The jury cleared Bent Jr. on six of the seven charges, but found him liable on one negligence claim. Their management company was found liable on some charges. Dellaportas called the verdict “a victory for justice” when we reached him on Monday. “It’s a bit curious why the SEC brought this case,” he said. “They never prosecuted anyone associated with the Lehman fiasco. Instead, they went after my clients, who were victims of that fiasco.”
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