Edward Siedle, called "the nation's most vocal critic of abuses in the money management industry" by the Associated Press and also President of The Benchmark Companies, said illegal practices such as front running, parking, pump priming and window dressing are "pervasive" in the industry during a hearing of the Senate Committee on Banking, Housing, and Urban Affairs.

The Wednesday meeting was the ninth in a series investigating practices in the mutual fund industry. The Committee’s final hearing is scheduled for April 8th.

Siedle’s allegations came after Senator Richard Shelby (R-Alabama) asked the panelists whether window dressing and similar practices were widespread.

Fellow panelist Paul G. Haaga, Jr., executive vice president and director of Capitol Research and Management Company, and chairman of the Investment Company Institute said he was not aware of window dressing and other practices. He added that tactics like window dressing were ultimately harmful to mutual funds, which have to disclose results over the five and ten year period or longer.

Fellow panelist, Mark Treanor, concurred that the practices are not major problems in the industry and that the "overwhelming majority" of people in the mutual fund industry are honest. Treanor is general counsel and head of the Legal Department of Wachovia Corporation.

In a later interview, Siedle remarked that truth is essential to the Senate Committee hearings and that "the industry is lying, stonewalling."

Requiring industry representatives to take an oath and testify in front of Congress, enhancing shareholder rights to sue for breach of fiduciary duty, and increasing collaboration of law enforcement are all part of the solution, Siedle said.

"I don’t think these are things the SEC can do. I firmly believe these are things the SEC will not do," Seidle added.

Siedle believes that the regulatory outcome depends on continued revelations driven by New York Attorney General Eliot Spitzer.

The likely outcome will be "minimal legislation dealing with the tip of the iceberg", including limited roles for mutual fund directors, Siedle concluded. 

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