“Three Pimco affiliates agreed to pay $18 million to resolve charges of improper market timing, marking the latest settlement in the trading-abuse scandal that has rocked the mutual-fund industry,” wrties Yuka Hayashi in today’s Wall Street Journal.

“Under the agreement with the attorney general of New Jersey, announced yesterday, Allianz Dresdner Asset Management of America LP — a unit of Germany’s Allianz AG that owns Pimco and several other U.S. fund companies — and two Allianz Dresdner units will pay $15 million in civil penalties and $3 million to cover the cost of investigations.”

“At the same time, New Jersey agreed to drop charges against Allianz’s Pacific Investment Management Co., clearing the names of the premier bond house and its chief investment officer and star fund manager, William Gross. ‘Mr. Gross has demonstrated in his public statements that he shares our view about protecting the integrity and health of his fixed-income funds,’ said Attorney General Peter Harvey.”

“None of the money from the New Jersey settlement goes to investors. However, Pimco had previously made reimbursements totaling $1.6 million to the funds it had determined were harmed by the trading, and Mr. Harvey said his office was satisfied that investors had been properly compensated for any damages by those payments.”

“Pimco’s stock-fund and distribution units and two top executives still face Securities and Exchange Commission civil claims. The Allianz group continues to negotiate with the SEC, said company spokesman Phil Neugebauer, without commenting on the status of the talks.”

“Stephen Cutler, director of the SEC’s enforcement division, declined to comment on the terms of the New Jersey settlement. ‘As far as the SEC is concerned, we will not accept any settlement that doesn’t fairly reflect the gravity of the misconduct and is otherwise in the public interest,’ Mr. Cutler said.”

“New Jersey alleged that the three Pimco affiliates had formed a fraudulent arrangement that allowed hedge fund Canary Capital Partners of Secaucus, N.J., to rapidly trade shares of some of the companies’ stock funds at the expense of ordinary shareholders. The companies didn’t admit or deny wrongdoing in settling the case.”

“Such an arrangement, Mr. Harvey’s office said, was in violation of fund policies, and was made in return for Canary’s pledge to give the Allianz group the business of managing long-term’ sticky’ assets. In a little more than a year, Canary made more than 200 market-timing transactions in the companies’ funds, including the Multi-Manager Series funds, totaling more than $4 billion in purchases and redemptions, Mr. Harvey said.”

“In addition to Allianz Dresdner, participating in the latest settlement are PEA Capital LLC, its stock fund unit formerly known as Pimco Equity Advisors LLC; and PA Distributors LLC, the group’s fund-distribution arm previously known as Pimco Advisors Distributors LLC.”

“Since the market allegations against the group surfaced, Pimco, of Newport Beach, Calif., and its top executives, including Mr. Gross, have fought vigorously to distance themselves from the Allianz units directly involved in the alleged improper action. They went so far as to have the name of one of the affiliates changed to PA Distributors, in order to drop the word Pimco. Allianz acquired a majority stake in Pimco in 1999.”

” ‘We have stated publicly from the moment the charges were filed in February that our people have acted in good faith, and that our clients’ interests have been protected,’ said Mr. Gross and Pimco Chief Executive Bill Thompson in a prepared statement. ‘We are pleased that this position has now been substantiated by the New Jersey attorney general’s action today.’ “