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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Richard Strong’s fall came quickly

Associated Press

MENOMONEE FALLS, Wis. — It took Richard Strong three decades to build his mutual fund company into a multibillion-dollar financial gem, but it all unraveled in a matter of months after he and the firm came under scrutiny in an improper trading investigation.

The probe into Strong’s actions culminated in a $175 million settlement last week and the company’s sale Wednesday of $34 billion in assets to Wells Fargo & Co.

“Dick built an extraordinary company and personally, I mean, I’m very sad to see in effect the death of his dream,” said Steve Hannah, a close friend and colleague of Strong’s for 20 years.

Efforts to reach Strong, 62, for comment Wednesday were unsuccessful. But his friends paint him as an intense, aggressive businessman who built Strong Financial Corp. from nearly nothing into one of the nation’s largest independent money managers. In the process, he became rich — worth an estimated $800 million according to Forbes magazine.

Hannah says Strong liked to take care of his employees, bringing in dozens of speakers to the company’s suburban Milwaukee headquarters, including famous names like Margaret Thatcher, and even offering them free daily lunch. Strong was also well known for his community philanthropy.

“Dick was the beating heart of Strong,” said Hannah, who has consulted for Strong Financial. “I expect him to rise from the ashes. He’s not a brooder and he’s not a person who sits around wringing his hands.”

In 1994, the Securities and Exchange Commission sanctioned Strong and Strong Financial for improper trading in the late 1980s.

At the time, Wall Street and investors were willing to give the founder and his company another chance.

“You accept it as, ‘He’s our boy, and he’s fighting for us,’ ” said Gary Tefft, a Menomonee Falls engineer who began investing in Strong funds 11 years ago and has no plans to leave.

Rumblings about the latest allegations against the company surfaced last September, when New York Attorney General Eliot Spitzer sued a hedge fund for improper fund trading and mentioned Strong Financial as one of the funds where the abuses had occurred — though Strong was not sued.

Spitzer later publicly criticized Richard Strong for the alleged abuses. By December, Strong had resigned as chairman of Strong’s mutual funds board while keeping ownership of 85 percent of the firm.

The company also acknowledged Strong engaged in some questionable trading in his personal accounts, as well as those of friends and family. Those transactions were estimated to have yielded as much as $600,000.

This time around, the financial community was less forgiving. With the trading scandal spreading quickly across the $7 trillion mutual fund industry, thousands of investors began pulling their money. The company announced it was for sale as it worked with regulators to reach a settlement over the allegations.

Last week, Richard Strong agreed to a $60 million fine to settle allegations he made improper mutual fund trades and publicly apologized for his actions. Strong Financial agreed to pay $115 million in related penalties.

The sale of Strong Financial’s assets to Wells Fargo should make Richard Strong an even wealthier man. He and his wife have formed a new company, Baraboo Growth LLC, to manage their personal assets.