The SEC charged former co-portfolio managers of a muni bond mutual fund with defrauding that fund while working at Aquila Investment Management.  Kimball Young (Salt Lake City, UT) and Thomas Albright (Louisville, KY) are alleged to have improperly charged municipal bond issuers more than a half-million dollars in undisclosed "credit monitoring fees" that they pocketed for themselves.

Sanctions.   Young and Albright ("Y&A") agreed to pay a combined $740,000 in disgorgement, prejudgment interest and penalties, and be barred for 5 years from the industry to settle the SEC charges.

    SEC's Alleged Findings.   Y&A began charging muni bond issuers "credit monitoring fees" in 2003 on certain private placement and non-rated bond offerings without informing Aquila management or the TFFU's trustees. Fees ranged between 0.5-1.0% of each bond's par value, were a one-time fee purportedly to compensate Y&A for performing additional ongoing credit monitoring that they contend was required because the bonds were not rated.  Any credit monitoring work the co-managers did was already part of their regular job responsibilities, although deal documents indicated the fees were required by, and would be paid to, the TFFU. 

Instead, the fees were wired to a company controlled by Young, who shared them equally with Albright.  From 2003 to 2009, they received $521K in fees - $256K for 2008, alone.  Aquila management learned of the fees in April 2009, at which point both were suspended and reported to the SEC. 

    SEC Staffers.   Investigated by Gerald Gross, James McGovern, Ibrahim Bah of the NY Reg. Office.  Aquila Investment Management cooperated in the investigation.   [SEC Release 11-5, 1/7]