Post by jcline on Sept 20, 2007 10:56:15 GMT -5
This came to me in an email........
=WSJ:5 Ex-Workers At Brokerage Firms To Face Criminal Charges
By Paul Davies
Of THE WALL STREET JOURNAL
NEW YORK (Dow Jones)--Five former employees at several Wall Street brokerage firms are expected to be face criminal charges in Brooklyn later Thursday in connection with alleged abusive stock-lending practices, according to people familiar with the matter.
Federal Bureau of Investigation agents arrested the five individuals early Thursday morning. They are expected to be arraigned in federal court in Brooklyn. The U.S. Attorney in the Eastern District of New York is expected to charge the individuals in connection with alleged bribes and kickbacks stemming from a stock-loan scheme, according to people familiar with the matter.
The Securities and Exchange Commission is expected to file civil charges as well. The charges cap a years-long investigation into the alleged abusive lending practices at Janney Montgomery Scott LLC, Morgan Stanley (MS), Van der Moolen, and other financial institutions.
(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)
Charles A. Ross, a defense attorney for Andrew Caccioppoli, formerly of Janney Montgomery, confirmed that his client was arrested Thursday morning and said he plans to plead not guilty and fight the charges.
The $10 billion stock-lending business has operated largely unnoticed for years. Its growth is associated with the increase in short selling, a trading strategy that requires borrowing securities.
The investigation has centered on conduct involving mostly lower-level employees across Wall Street and related to the use of "finders," or firms that act as intermediaries and assist borrowers and lenders in locating stock to borrow, these people said.
The types of alleged schemes that authorities are investigating vary. Under one such alleged scheme, an individual at a brokerage would divert money to a family member at a finder shop, a way to artificially inflate the cost of borrowing. Under another alleged scheme, loans were being passed through several firms or intermediaries without any purpose other than to drive up the cost of borrowing the stock, these people said.
Some individuals have reached settlements with the SEC and have pleaded guilty to criminal charges, these people said. In its settlement with the NYSE, Janney Montgomery Scott agreed to pay $2.5 million to settle related charges over allegations that it failed to supervise its stock-loan desk in connection with improper stock-loan transactions.
-By Paul Davies, The Wall Street Journal; 212-416-4968