Ex-Morgan Stanley broker to plead guilty in kickback scheme

A former broker for Morgan Stanley and Banc of America Securities LLC will plead guilty today to receiving kickbacks for his role in a stock-loan scheme that operated from March 2004 to December 2005, court records show.

Salvatore Zangari, 33, is scheduled to appear before U.S. District Court Judge John Gleeson in federal court in Brooklyn, New York for a guilty plea, according to the court’s official calendar.

The office of Brooklyn U.S. Attorney Benton Campbell has had a long-running investigation of the stock-loan industry, which focuses on allegations that employees took bribes or purported finder fees, often when no services had been rendered. More than 30 people have pleaded guilty as a result of the federal probe.

A criminal information filed in the case states Zangari received more than $187,000 in kickbacks in the scheme. He is accused of conspiring with another former Morgan Stanley broker, Peter Sherlock. Sherlock pleaded guilty in March 2008 to taking illegal kickbacks and awaits sentencing.

The U.S. Securities and Exchange Commission said in a complaint filed March 9 that Zangari had been employed as a stock-loan trader for 11 years at several Wall Street brokerage firms where he was responsible for “negotiating, arranging and entering into stock-loan transactions” on behalf of the firms. The SEC said most recently he worked at UBS Securities LLC, employed there from October 2006 to July 2009.

Loans of stock are made to an investor who’s selling short to cover delivery of the shares to the buyer.

The SEC complaint said that Zangari and Sherlock were friends, and that Sherlock approached him in March 2004 to ask if he was “interested in making some extra cash” by participating in the kickback scheme.

A lawyer for Zangari couldn’t be immediately determined.

The case is U.S. v Salvatore Zangari, 10-CR-00255, Eastern District of New York (Brooklyn).

Related Topics: Morgan Stanley & Co.