State of New York Settles With Morgan Stanley Over Hip-Hop Money Manager's Abuses
New York's Attorney General Eliot Spitzer announced a settlement with investment bank Morgan Stanley after the company came under scrutiny for fraud, when one of its brokers defrauded 15 customers out of $740,000.
Gabriele Tamar Smith, who counted DJ Clue, Fabolous, Kevin Liles and other Hip-Hop stars and executives as clients, ran Premier Business Management L.L.C. in New York, while working for Morgan Stanley's White Plains office between 1997 and 2001.
Smith's plight was chronicled in an August 2005 article in The New York Times.
She was indicted on federal charges last year and was the subject of several lawsuits filed in New York Supreme Court in Manhattan.
Smith was accused of stealing more than $3 million dollars from clients, using some of the money to pay other investors, while allegedly pocketing the rest.
After an investigation, Spitzer found that Smith "mismanaged customer accounts by engaging in excessive, unauthorized and unsuitable trading, signing wire transfers and new account documents without customer authorization and failing to inform her clients of the risks of trading on margin"
Smith, who made over $1 million in trades on one account worth only $60,000 pocketed more than $15,000 in commissions, while the client "lost almost everything in a year," according to Spitzer.
In another incident, Smith signed a clients name on a wire transfer document, wired $20,000 out of a clients account and into an escrow account she controlled, in order to close on a home she recently purchased.
While the trades generated hefty commissions for Smith, she defrauded customers who were senior citizens or novice's in the area of the stock market.
Under the terms of the settlement, Morgan Stanley has agreed to pay restitution in the amount of $740,964.18, and costs and penalties totaling $300,000.
Morgan Stanley had already settled two claims with former clients of Smith's, one for $1.9 million and the other for $300,000.
In March of 2003 the NASD, which is the primary regulator of America's 600,000 security representatives, banned Smith from associating with any NASD member firm.
Gabriele Tamar Smith, who counted DJ Clue, Fabolous, Kevin Liles and other Hip-Hop stars and executives as clients, ran Premier Business Management L.L.C. in New York, while working for Morgan Stanley's White Plains office between 1997 and 2001.
Smith's plight was chronicled in an August 2005 article in The New York Times.
She was indicted on federal charges last year and was the subject of several lawsuits filed in New York Supreme Court in Manhattan.
Smith was accused of stealing more than $3 million dollars from clients, using some of the money to pay other investors, while allegedly pocketing the rest.
After an investigation, Spitzer found that Smith "mismanaged customer accounts by engaging in excessive, unauthorized and unsuitable trading, signing wire transfers and new account documents without customer authorization and failing to inform her clients of the risks of trading on margin"
Smith, who made over $1 million in trades on one account worth only $60,000 pocketed more than $15,000 in commissions, while the client "lost almost everything in a year," according to Spitzer.
In another incident, Smith signed a clients name on a wire transfer document, wired $20,000 out of a clients account and into an escrow account she controlled, in order to close on a home she recently purchased.
While the trades generated hefty commissions for Smith, she defrauded customers who were senior citizens or novice's in the area of the stock market.
Under the terms of the settlement, Morgan Stanley has agreed to pay restitution in the amount of $740,964.18, and costs and penalties totaling $300,000.
Morgan Stanley had already settled two claims with former clients of Smith's, one for $1.9 million and the other for $300,000.
In March of 2003 the NASD, which is the primary regulator of America's 600,000 security representatives, banned Smith from associating with any NASD member firm.
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