WASHINGTON (Reuters) - Five additional people, including former employees of Morgan Stanley Co and Janney Montgomery Scott LLC, were indicted on Thursday as part of a large federal investigation into the stock-loan industry.
The latest indictments on securities fraud and other charges arise out of an ongoing probe into bribery and kickbacks in the industry, where people called “stock loan finders” seek stock to cover short sales of shares.
Investigators have found some stock-loan traders steered millions of dollars of fraudulent finder fees to conspirators, often in exchange for no services, in exchange for outright bribes or payments to relatives.
So far, 18 people have pleaded guilty in connection with the schemes, said a statement from the U.S. Attorney’s Office in Brooklyn, New York.
Those indicted Thursday were named as Darin DeMizio, a former Morgan Stanley supervisor; Robert Johnson of Tyde Inc; and Joseph Lando, a former manager of the stock-loan desk at Janney.
Andrew Caccioppoli, another former manager at Janney’s stock-loan desk, had been indicted previously but was re-indicted along with his sister, Donna Macli and her husband Thomas Macli.
DeMizio’s lawyer, Kristan Peters, said he pleaded not guilty on Thursday and is not in custody. Efforts to contact the others indicted, or their lawyers, were not immediately successful.
The indictment alleges that the Maclis do not work in the securities industry but Caccioppoli caused Janney to pay $350,000 in phony finder fees to the couple.
DeMizio is accused of routinely directing Morgan Stanley stock-loan business to two stock finders, including Johnson, in exchange for kickbacks and bribes paid to two of DeMizio’s family members.
Johnson is alleged to have paid kickbacks to a trader at JPMorgan Chase on stock-loan trades.
Lando is alleged to have received cash kickbacks in exchange for giving away favorable Janney business to Van der Moolen. He is also charged with paying phony finder fees to the relatives of traders at A.G. Edwards and Nomura Securities in exchange for business from those firms.
DeMizio, Lando, Johnson, Caccioppoli and the Maclis were charged with conspiracy to commit securities and wire fraud, which carries a maximum prison term of 25 years.
Johnson was also charged with a money-laundering conspiracy, which carries a maximum prison term of 20 years.
Lando was also charged with commercial bribery in violation of the Travel Act, which has a possible sentence of five years.
Caccioppoli and the Maclis were also charged with mail fraud, which has a maximum prison term of 20 years.
DeMizio, Lando, Johnson and the Maclis also face civil charges, previously filed by the U.S. Securities and Exchange Commission.
Reporting by Diane Bartz; Editing by Tim Dobbyn, Gary Hill