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.
