Cases of brokers stealing from their clients are not unheard of. After all, former Lehman Brothers broker Frank Gruttadauria faces six to eight years in prison after pleading guilty to charges that he stole $125 million from his clients over six years.
But, according to the Massachusetts Securities Division, a UBS PaineWebber broker gave the old crime of embezzlement a new twist: According to charges recently filed last month by Massachusetts Secretary William Galvin, broker Scott McCreadie stole more than $4 million from his clients — including, the state alleges, his father-in-law, his wife and his children.
If the state's Securities Division finds that PaineWebber was lax in its supervisory and compliance procedures, fines and suspensions could be levied against the firm. Lack of broker supervision has been a major problem for the industry this year. The NYSE launched an investigation into compliance procedures after the arrest of Gruttadauria.
A lawyer for the McCreadie family alleges that McCreadie, who worked in the firm's Wellesley office, set up as many as 70 false accounts to hide his thievery. Galvin says PaineWebber is under investigation “to determine why they failed to detect and stop broker theft of his clients' assets.” McCreadie's lawyer says his client didn't commit any criminal acts and will be vindicated.
According to Galvin, PaineWebber told the NASD that McCreadie “abandoned” his position with the company last June. PaineWebber also reported that McCreadie asserted his Fifth Amendment right against self-incrimination when questioned about the charges, said division spokesman Brian McNiff.
PaineWebber did not return a call seeking comment. It reportedly is running its own investigation. Galvin has since brought charges against Credit Suisse First Boston for issuing misleading research and other violations.