Photographer: Chris Ratcliffe/Bloomberg
Ex-Morgan Stanley Brokers Admit to Using Client Cash for Wind FarmBy
Polese and Peterson were fired when the fraud was discovered
Men plead guilty to investment-adviser fraud, conspiracy
Two former Morgan Stanley brokers pleaded guilty to using more than $500,000 in client money to make unauthorized investments in a wind farm and pay personal expenses including college tuition and credit card bills, federal prosecutors said.
James Polese, 51, and Cornelius Peterson, 28, pleaded guilty to conspiracy, investment-adviser fraud and bank fraud, U.S. Attorney Andrew Lelling in Boston said Wednesday in a statement. Polese also pleaded guilty to identity theft, prosecutors said.
In 2014, the pair tapped a client account to make a $100,000 investment in the wind farm project without authorization, according to the statement. The next year, they used $400,000 from another client’s account to back a letter of credit in support of the project, prosecutors said.
Polese and Peterson were also accused of improperly using $350,000 of client money to make an investment in real estate in 2016, according to court records. And last year Polese allegedly diverted funds to pay for his children’s college tuition and other expenses.
The fraudulent conduct was discovered by Morgan Stanley, which immediately fired the men and reported their behavior to regulatory and law enforcement agencies, the company said in a statement.
"Morgan Stanley is strongly committed to the protection of client assets, and to act quickly when fraudulent activity is uncovered," the company said.
Prosecutors said in the plea agreements that they’d recommend Polese serve at least six years and three months behind bars, while saying the U.S. wouldn’t appeal a sentence for Peterson of less than two years and three months, according to court records.
Peterson’s lawyer, Carol Starkey, said in an email that her client was a "minor participant" in the scheme. Polese’s attorney, Mark Smith, didn’t return a call or email seeking comment.
The cases are U.S. v. Peterson, 18-cr-10027, and U.S. v. Polese, 18-cr-10028, in U.S. District Court for the District of Massachusetts (Boston).