The Securities and Exchange Commission has announced that it won a decision from the U.S. District Court in New Haven ordering the disbursement of $3.3 million to more than 600 victims of fraud related to the NewAlliance Bancshares Inc.’s initial public offering of stock in 2004.
The SEC has collected funds from many of the perpetrators of the scheme in 2004, in which several investors who weren’t depositors managed illegally to buy stock, in a move that limited the shares that actual customers could acquire. The IPO was to have been limited to customers of New Haven Savings Bank, because it had been a mutual institution, owned by its depositors.
After the IPO and conversion to a stock-based bank, New Haven Savings changed its name to NewAlliance Bank, then acquired both Tolland Bank and the Savings Bank of Manchester, converting those two banks to the NewAlliance moniker.
In 2005, a New Jersey man and a Fairfield investor pleaded guilty to fraud charges and were fined. The SEC has said it is pursuing others as well, including Milford developer Gary Richettelli. In September, the SEC filed a motion in federal court for an injunction stopping Richetelli from spending any money related to the scheme, which the SEC has accused him of masterminding.
The New Jersey man, George J. Kundrat, admitted that he and others participated in a scheme in January 2004 to buy 140,000 shares of stock in NewAlliance Bancshares during the New Haven Savings Bank conversion and resold the shares for his own personal profit. He pleaded guilty to conspiracy to commit mail fraud, wire fraud, and securities fraud.
The Fairfield investor, Robert R. Ross, admitted that he made $989,000 selling stock he was not eligible to buy when New Haven Savings Bank converted to a publicly traded institution.
The criminal securities prosecution was the first ever brought in connection with an initial public offering in a bank conversion.
Kundrat and his co-conspirators were not eligible to buy stock in the IPO, but used the subscription rights of eligible depositors to resell the shares at a profit.
As for Richetelli, the SEC claimed in its September motion filed in federal court that he conspired with other New Haven Savings Bank depositors to obtain profits for himself by lending them money to buy shares, then splitting the profits with him when the stocks were sold.
Under the SEC’s distribution plan, each eligible claimant will receive $4.19 for each share of NewAlliance stock he would have received if not for the fraud. No NewAlliance official has been implicated in the scheme.
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This article includes Associated Press reporting.
