Benefits December 24, 2003

AT&T Places Management Salaries on Hold

December 24, 2003 (PLANSPONSOR.com) - Looking to reduce its cost structure, AT&T Corp. will freeze management salaries until April 2005.
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The move by the telecommunication company will impact AT&T’s 43,000 non-union employees, who were scheduled to receive merit increase this coming April. The salary freeze though will not impact management bonuses, which will still be paid out to management employees in March, according to a Dow Jones report.

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AT&T Chairman and Chief Executive Officer (CEO) Dave Dorman told employees about the decision via an e-mail last week. The latest move represent the second such merit increase postponement this year – a similar measure was undertaken last April, pushing raises back to September – and keeps management increases on an 18-month cycle.

“By April 2005, business conditions permitting, we expect to resume merit increases on an annual basis, once again tying them to the yearly performance review cycle,” Dorman said in the e-mail.

An AT&T spokeswoman was unable to provide Dow Jones with an estimated savings the company will reap from the move.

Compliance December 23, 2003

SEC: Las Vegas Investor Made $175M in Ill-Gotten Gains

December 23, 2003 (PLANSPONSOR.com) - A Las Vegas man who allegedly reaped about $175 million in profits from improper late trading and market timing of Alliance Capital Management mutual funds has been charged with civil fraud.
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>The US Securities and Exchange Commission (SEC) charged that Daniel Calugar, through Security Brokerage Inc., made the profits between 2001 and 2003 through the fund trading activities, according to Dow Jones.

>Calugar allegedly transferred $50 million of proceeds from his scheme out of Massachusetts Financial Services on December 18, the same day the SEC instituted an enforcement action against Alliance Capital, according to Reuters.  Alliance Capital agreed to pay $250 million to settle SEC claims it defrauded investors by allowing market timing in some of its mutual funds (See  Alliance, Regulators Reach Settlement ).

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>Based on these allegations, a federal judge issued a temporary restraining order against Daniel Calugar and Security Brokerage Inc., freezing their assets and ordering them to preserve financial documents.

“Our enforcement action and request for an asset freeze against Daniel Calugar further reflect the commission’s resolve to ensure that the proceeds of illegal late trading and market timing are returned to investors,” Stephen Cutler, the SEC’s director of enforcement, said in a statement.

>According to the SEC, Calugar, 49, agreed to make long-term investments in Alliance Capital hedge funds in exchange for Alliance allowing him to engage in market timing in its mutual funds. Alliance could then draw fees off the amount of assets in the hedge fund, while Calugar profited from quick in-and-out trades and late trading, regulators said.

>Calugar made a similar proposal to Massachusetts Financial Services, the SEC alleges, but that firm turned him down. Still, he was able to engage in some market timing in MFS, the SEC said in its action. He also engaged in late trading, the SEC said, which allows a trader to profit from market events that occur after 4 p.m. EST, but that are not reflected in the mutual fund’s price.

The agency’s settled action against Alliance identified Calugar as the largest market timer at the fund company.

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