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.

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