Six people — four of them Wall Street figures, but also a secretary and a mail carrier — are now caught up in a wider probe that involves an alleged system of finder fees and illegal kickbacks at several Wall Street brokerage firms.
The six were charged in three indictments unsealed today by the U.S. Attorney's Office for the Eastern District of New York.
One of the indictments alleges the dental secretary, Donna Macli, 45, and mail carrier, her husband Thomas Macli, 51, received phony finders fees from her brother, Andrew Caccioppoli, 47, a former manager of the stock loan desk at Janney Montgomery Scott LLC.
The three were charged with conspiracy to commit securities fraud and with mail fraud. The charges against Caccioppoli superseded those in an earlier indictment.
The second indictment charges Darin DeMizio, 42, a former supervisor at Morgan Stanley's securities lending desk, and Robert Johnson, 44, who represented Tyde Inc., with conspiracy to commit securities and wire fraud.
The third charges Joseph Lando, 35, another former manager of the stock loan desk at Janney, with the same offense, as well as conspiracy to commit commercial bribery in violation of the Travel Act.
The investigation focuses on the practices of brokerage firms that borrow and loan securities and use finding firms that locate the stock to be loaned.
Brokerage firms and investment banks use those practices to cover short sales of stock and as collateral on financial deals. The stock loan finders paid fees for facilitating the stock transactions.
The investigation has widened from initial charges last September that charged former Morgan Stanley and Janney employees — including Caccioppoli — in alleged stock loan schemes.
The investigation has focused on stock loan traders at large brokerage firms that devised fraudulent stock loan transactions, including transactions that involved shell companies allegedly established by one of the defendants' relatives.
According to the indictment, "DeMizio and others arranged for Morgan Stanley to borrow the securities from and loan securities to certain other broker-dealers who either paid finder fees to Tyde … or who acted as intermediaries between Morgan Stanley and other broker-dealers."
The indictment alleged that Johnson and an unnamed "corrupt stock-loan finder" would transfer a portion of the finder fees to DeMizio's family members who are identified in the indictment as John Doe #1 and John Doe #2.
A spokeswoman for Morgan Stanley told ABC News in a statement, "The alleged conduct by a former Morgan Stanley employee is in direct violation of the firm's values and policies. We have fully supported and provided every assistance to the government's investigation into this matter."
Johnson also faces money laundering charges for allegedly working with an alleged corrupt trader at JPMorgan Chase identified in the indictment as "Trader B." The indictment alleged that between 1994 and 2003 Johnson and others were devising "a scheme to cause themselves and others to receive finder fees in connection with stock loan transactions involving … the JPMorgan Chase Securities … loaned by Trader B on behalf of JP Morgan Chase."
The indictment alleged that "Trader B" caused JP Morgan to loan the securities at below market rates to intermediary brokerage firms including a firm identified as IBC located in the Netherlands Antilles, after the transfers occurred IBC spread the finder fees to Johnson and the JP Morgan trader.
"Johnson and Trader B entered into these financial arrangements without the knowledge or approval of JPMorgan Chase," the indictment noted.
A spokesman for JP Morgan declined to comment on the matter.
To date, 18 defendants have pleaded guilty in the investigation included former employees at A.G. Edwards, Oppenheimer & Co., Morgan Stanley; TD Waterhouse Kellner Dileo & Company, Inc.; Inc, Nomura Securities International, Inc.; PFPC Worldwide Inc.; Schonfeld Securities, LLC; and Van der Moolen Specialists.
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Content retrieved from http://abcnews.go.com/TheLaw/FedCrimes/story?id=4911260&page=1