8 Accused of Kickbacks, Fraud at Wall Street Brokerage Firms
May 23, 2008 (Associated Press) NEW YORK - Eight people were charged on Thursday in a series of schemes involving kickbacks and fraud at the stock-loan desks of Wall Street brokerage firms.
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Four of the defendants pleaded not guilty to conspiracy to commit securities fraud and money laundering in federal court in Brooklyn. The rest were either expected to be arraigned or to surrender later.
Prosecutors initially announced that six people had been charged, but later revealed two more people were named in a separate indictment. Among the eight were former stock loan supervisors at Morgan Stanley and Janney Montgomery Scott LLC.
Morgan Stanley spokesman Mark Lake said his firm was cooperating with the investigation, adding that the allegations were in "direct violation of the firm's values and policies."
Janney issued a statement saying its "involvement with this matter ended some time ago."
The charges are part of an ongoing, industrywide investigation into allegations of bribery and kickbacks in the securities lending industry, also called the stock-loan industry. So far, 26 people have been charged; 18 have pleaded guilty.
Indictments allege the crimes revolved around large brokerage houses' practice of borrowing and loaning of securities among themselves. The investigation revealed stock-loan traders funneled millions of dollars in fees to "finders" - people who located stocks to cover short sales - in exchange for cash bribes, prosecutors said.
If convicted, the defendants face up to 25 years into prison, though the terms could be much shorter under federal sentencing guidelines.