Fund pioneer Bent takes stand at trial Thursday; juror excused

* U.S. regulators accuse Bent and son of lying to investors

* Bents deny civil fraud charges, say victim of 2008 crisis

* One of nine jurors excused by the judge

By Grant McCool

NEW YORK, Oct 10 (Reuters) - Money market pioneer Bruce Bentwill testify on Thursday at a trial in which U.S. marketregulators accuse him and his son of fraud as they tried to stopa run on their Reserve Fund in the September 2008 financialcrisis.

On the second day of the civil trial in Manhattan federalcourt on Wednesday, a lawyer for the U.S. Securities andExchange Commission told the judge she would call Bent to thewitness stand on Thursday.

The regulator sued Bent and his son, Bruce Bent II, in 2009,saying they lied to investors about the safety of their moneyfollowing the Sept. 15, 2008 bankruptcy of Lehman Brothers, anevent that roiled world financial markets. Reserve held $785million in Lehman debt, or 1.2 percent of the $62 billion itthen had invested.

The day after Lehman filed the biggest bankruptcy inhistory, the fund's net asset value "broke the buck" or fellbelow $1 a share, a rare event that spells death forconservative money market funds.

Also on Wednesday, U.S. District Judge Paul Gardephe excusedone of the nine jurors because her employer would pay her foronly three days out of the expected three weeks of the trial.

The judge told the juror, a secretary in a doctor's office,"we don't want to put you in a position where you have no incomecoming in for three weeks" and sent her home.

Reserve was the first money-market fund in the United Stateswhen Bruce Bent started it in 1970. Its collapse was a driver ofthe credit market seizure following Lehman's bankruptcy. Newregulations have since reduced the credit and maturity risksthat money funds may take.

By January 2010, Reserve said it had distributed nearly allof the $50.5 billion left in its Reserve Primary fund afterLehman's bankruptcy. Investors recovered about 99 cents on thedollar.

The SEC and the Bents were unable to reach a settlement. Theregulator seeks unspecified gains the Bents might have made andan unspecified fine if the jury decides the SEC proved its case.

In opening arguments on Tuesday, SEC lawyer Nancy Brownaccused the Bents of lying to investors and trustees on Sept. 15and 16, 2008 in the scramble to save themselves. The Bents'lawyer, John Dellaportas, said there was no fraud or cover-upand told jurors no one could have foreseen the massive scale ofthe financial crisis that sapped investor confidence.

The case is SEC v. Reserve Management Co et al, U.S.District Court, Southern District of New York, No. 09-04346

(Reporting By Grant McCool; Editing by Richard Chang)

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Keywords: RESERVE SEC/