updated 12/18/2003 9:28:33 AM ET 2003-12-18T14:28:33

A former mutual fund executive was sentenced Wednesday to one to three years in prison after pleading guilty to charges that he hid or destroyed items sought in New York Attorney General Eliot Spitzer's probe of improper mutual fund trading.

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James P. Connelly Jr., former vice chairman of Fred Alger & Co., pleaded guilty in state court in October to tampering with evidence. He must serve at least a year before he may be paroled. Connelly could have been sentenced to as many as four years.

Connelly, 40, has already paid $400,000 to the Securities and Exchange Commission to settle separate civil claims that he allowed improper late fund trading that prosecutors say probably cost other investors billions of dollars.

In late trading, an investor trades funds at the 4 p.m. prices after the market closes. That arrangement allows the investor to cash in on after-hours news ahead of other investors, who at that hour would be forced to risk buying at the next day's closing price. Mutual funds are priced once daily. Spitzer is investigating several companies for alleged late trading, which is illegal.

Spitzer has said Connelly caused documents to be withheld, and directed employees to delete e-mails sought under a subpoena. He said Connelly also tried to hide trading arrangements between his firm and Veras Investment Partners, a Texas hedge fund.

Connelly told Supreme Court Justice James Yates that he was "ashamed" of his behavior and "disappointed" that he is going to jail after a 17-year career at Alger. He also said he despaired over the pain he had caused his family.

Yates said he received more than 70 letters of support for Connelly. He said the defendant clearly had a lot of good in him, but he was sending him to prison because he had violated investors' trust and tampered with evidence that proved it.

"The sentence reflects the seriousness with which our office and the courts views these crimes," Spitzer said in a statement.

Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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