A former vice president and advisor with Morgan Stanley pleaded guilty to stealing about $1.7 million from his mother and mother-in-law (who were also clients) over the course of 10 years, according to the Justice Department.
The Securities and Exchange Commission also filed charges against Douglas McKelvey, the Texas-based advisor who worked with Morgan Stanley until 2022.
McKelvey began his career at UBS in 2002, and worked briefly at Citigroup before joining Morgan Stanley in 2009, according to his BrokerCheck profile (FINRA barred McKelvey from the industry in 2022 for not cooperating with an investigation into his conduct).
Beginning in June 2013 and continuing until January of last year, McKelvey stole funds from the Morgan Stanley accounts of both his mother and mother-in-law.
In the first two years, McKelvey would issue checks from his mother’s Morgan Stanley accounts to pay another bank to settle credit card payments for McKelvey or his wife for personal expenses (according to the DOJ, these expenses included personal trips, cruises, restaurants and salons). In at least one case, McKelvey falsely filled out a form that he’d gotten a verbal okay to issue the check.
In 2015, as well as later on, McKelvey made unauthorized transfers from his own bank into the Morgan Stanley customer accounts, entering the account information for the latter accounts as the payment instructions at his own bank. McKelvey was able to do so because Morgan Stanley didn’t require an authorization from the account holder for third-party ACH transfers.
At other points McKelvey would shuffle funds via “internal cash journal transfers” to a separate Morgan Stanley trust account, which he would then use to make ACH payments on the credit cards. A few days after the transfers from the client account into the trust account, there’d be a transfer with an identical value to make credit card payments at the other unnamed bank.
Often, McKelvey would sell securities in his mother’s account to generate cash he would then misappropriate, according to the SEC. McKelvey did the same thing with his mother-in-law’s accounts; at one point, when she noticed a payment to the unnamed bank from her account, she asked for an explanation, and McKelvey told her it was “normal practice” for Morgan Stanley to route customer funds through that institution.
“Separately, at another time, McKelvey told (his mother-in-law) that he was using money in her account to invest in an annuity that would provide her with benefits,” the SEC charges read. “He provided her with a fake annuity document to substantiate his claim. In reality, the annuity did not exist.”
Heather Barbieri, McKelvey’s attorney, said the advisor “consistently demonstrated” cooperation with both the police and the courts, and would continue doing so.
“He regrets his actions and is committed to making amends,” she said.
According to a Morgan Stanley spokesperson, the firm detected unauthorized activity in the client accounts, fired him and "amicably resolved the matter with his relatives."
The SEC is seeking injunctive relief, disgorgement and civil penalties in its own charges. McKelvey faces up to 10 years in prison after pleading guilty to money laundering charges in federal court, and the date for the sentencing hearing is yet to be determined.