New York state attorney general Eliot Spitzer yesterdat filed a lawsuit against a hedge fund and others, alleging they engaged in a fraudulent mutual fund market timing scheme that damaged long-term investors.

Spitzer says that the defendants in the lawsuit — Samaritan Asset Management Services Inc., Johnson Capital Management Inc., and their principals — engaged in a deceptive practice known in the industry as “flying under the radar” of monitoring systems established by mutual funds to detect market timing.

It claims that the defendants disguised their timing activities from the various targeted mutual fund families by attaching or “piggybacking” their trades on the investment accounts of retirement plans that were customers of Security Trust Company, a trust company and national banking association located in Arizona.

The lawsuit, filed November 16 in State Supreme Court, New York County, seeks to enjoin defendants from conducting deceptive timing in mutual funds and restitution.

As a result of a related investigation by the Attorney General’s Office, Grant Seeger, the CEO of STC pleaded guilty in 2005 in New York County Supreme Court to second degree grand larceny, a class C felony, and to a violation of the Martin Act, a class E felony. STC President William Kenyon pleaded guilty to a felony violation of the Martin Act.