This was sent to me from someone waiting to find out what their pension fund balance actually is...
News
Broker blames lax bosses
01/25/02
Connie Schultz, Teresa Dixon Murray and John Caniglia
Plain Dealer Reporters
Investment broker Frank D. Gruttadauria told the FBI that his employers' "greed and a lack of attention at the senior level" allowed him to bilk his clients out of more than $100 million.
"I can hardly believe that I could have done this without detection for so long," Gruttadauria wrote in a letter he sent to federal agents before he vanished Jan. 11.
From Our Advertiser
The Plain Dealer obtained the letter, in which the 44-year-old general manager of Lehman Brothers Inc. in Cleveland admits that in the past 15 years he "caused misappropriations" but denies that he took the money for himself.
Gruttadauria, of Gates Mills, said he was the only person involved, though sources suspect that he had help.
In the confessional letter, Gruttadauria says, "I am unwilling to continue, and I'm ashamed and sorry for what I have done."
He says the scheme began as a way to cover lost money for his clients and "mushroomed over the course of time."
The letter says he offered the FBI digital tapes of his transactions to unravel the arrangement.
Joseph Persichini, the assistant agent in charge of the FBI's Cleveland office, declined to comment on the letter or the tapes yesterday.
He also declined to discuss the investigation. A spokesman for Lehman Brothers called Gruttadauria's comments about the firm's management "obviously pretty self-serving."
Sources said yesterday that they expect the losses could be as high as $300 million, and several victims are close to filing lawsuits against Lehman Brothers and two other firms where Gruttadauria previously worked, Hambrecht & Quist and S.G. Cowen Corp. Spokesmen for those companies couldn't be reached last night.
Those close to the case confirmed that six of Gruttadauria's alleged victims - prominent developer Dominic Visconsi Sr.; his two sons; former U.S. Rep. James V. Stanton; and a father and son from Beachwood - lost a combined $25 million to $50 million.
The elder Visconsi and Stanton, who also was president of Cleveland City Council in the 1970s, could not be reached last night.
"We are hopeful that Lehman Brothers will compensate our clients for the extraordinary losses they suffered," said the men's lawyer, Geoffrey Mearns.
Gruttadauria created and sent out thousands of fake monthly statements and tax records to clients at their homes or businesses, sources said.
The statements indicated that the investors' balances had jumped over the years, when in fact they were exaggerated, or the money was stolen.
The brokerage houses did send genuine statements out, but unwittingly sent them to Gruttadauria at a post office box he arranged.
Sources said Gruttadauria also apparently forged letters to Lehman in his clients' names, authorizing Lehman to send account information to the post office box.
Attorneys for several of Gruttadauria's local clients have started contacting national firms that specialize in securities law and investor claims. One Cleveland lawyer has contacted Maddox Koeller Hargett & Caruso of Indianapolis, according to Mark Maddox, founding partner of the firm. It is the largest securities practice in the nation.
"They're looking to assemble a dream team of attorneys" to chase down the tens of millions they lost, Maddox said. "This one is really kind of unusual. The magnitude of this case may exceed anything we have ever seen."
The investigations by the FBI, the U.S. Securities and Exchange Commission and the National Association of Securities Dealers spread yesterday to anyone who had dealings with Gruttadauria.
Authorities are particularly interested in Gruttadauria's activities with National City Bank in Cleveland. Lawyers and securities experts say that if Gruttadauria stole any clients' money, he would have had to set up new accounts at a bank, forge signatures and have accounts where he could transfer money.
National City Chairman and Chief Executive David Daberko said Gruttadauria was a customer, and a spokesman said the bank is cooperating with investigators.
Also yesterday, the Ohio Department of Commerce suspended Gruttadauria's license to sell securities while it investigates alleged violations of state laws.
The case against Gruttadauria involves an unusual twist: In 2000, he lost more than $800,000 because, he asserted, Paradyne Networks Inc., a Largo, Fla., company that designs and markets computer networking products, lied to him by artificially inflating its stock prices.
And what did Gruttadauria do when he found out?
He sued the company.
"I doubt, with his history, that he will be testifying in the case," said an attorney defending Paradyne. The case is pending.
As Gruttadauria's clients line up with their own legal action, they're remembering him by his last e-mail to them, a month ago, on Christmas Eve.
"It's funny how things change in a year," Gruttadauria wrote. "Heroes wear different uniforms. A year ago they wore sports uniforms. Today they are in firefighter coats and police hats.
"A year ago people searched their bank accounts for the money to pay for airline tickets for holiday travel. Now many of us search our hearts for the courage to board an airline. A year ago Christmas was a day to exchange gifts. Today we exchange a common wish for peace and security in the coming year.
"However the past year has affected you, in whatever way you feel a more profoundness in the holiday season this year, I wish you . . . happiness."
Plain Dealer reporter Bill Lubinger contributed to this story.
Contact Connie Schultz at:
cschultz@plaind.com, 216-999-4854 |
