Letter From Broker on the Run Blames Employers for Being Lax

January 26, 2002
The Associated Press
The Cincinnati Enquirer

CLEVELAND–A missing stockbroker said in a letter to the FBI that lax supervision made it possible for him to misappropriate money for 15 years, the Plain Dealer reported Friday.

The government is investigating reports that about 25 clients of Frank D. Gruttadauria may have lost at least $100 million. The FBI and Justice Department issued an arrest warrant for Mr. Gruttadauria on Friday, charging him with making false statements to a financial institution. Wall Street regulators also have been investigating.

“I can hardly believe that I could have done this without detection for so long,” wrote Mr. Gruttadauria, 45, of suburban Gates Mills, according to the newspaper, which obtained a copy of the letter.

“The various firms’ greed and lack of attention at the senior level contributed greatly to that. Be that as it may, I am unwilling to continue and I’m ashamed and sorry for what I have done.”

Mr. Gruttadauria had worked in Cleveland at Lehman Brothers Inc. since Oct. 10, 2000, when the company purchased the business of New York-based SG Cowen Securities Corp., Mr. Gruttadauria’s former employer in Cleveland. He worked for Hambrecht & Quist in Chicago from 1987-89.

Lehman Brothers described the comments as self-serving.

Lawrence L. Klayman, an attorney who specializes in securities law, said his reading of Mr. Gruttadauria’s comments convinced him that lack of management oversight played a role.

“It was lax control — the guy is right,” Mr. Klayman said Friday from his Boca Raton, Fla., office. “I think it’s typical and it happens all over the place.”

Mr. Gruttadauria’s letter, which was sent to federal authorities before he disappeared Jan. 11, said he acted alone and didn’t take money for personal use.

“This began as an attempt to make up lost monies for customers and mushroomed over the course of time,” he said.

Mr. Gruttadauria is suspected of having account statements for about 25 wealthy people mailed to his post office box. Then he allegedly forwarded falsified statements which inflated their value. Mr. Klayman said industry rules prohibit brokers from holding mail for clients. Sending multiple statements to the same post office box should have tipped Mr. Gruttadauria’s bosses to possible problems, he said.

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