Former Brokers Charged With Securities Fraud

Four former stock brokers at Citigroup, Lehman Brothers Holdings, and Merrill Lynch & Company were charged with securities fraud for letting day traders eavesdrop on internal conversations with institutional clients.The U.S. Attorney in Brooklyn, Roslynn Mauskopf, unsealed a 40-count indictment yesterday alleging that the four men let day traders listen to conversations with large institutional clients over “squawk boxes,” the intercoms used by brokers to discuss pending trades. “The defendants put their own interests ahead of their firms and their firms’ clients by stealing valuable, confidential information and selling it to unscrupulous day traders,” Ms. Mauskopf said in a statement. The defendants received “thousands of dollars in kickbacks and bribes, and the day traders reaped hundreds of thousands of dollars in illegal profits,” she said.The Securities and Exchange Commission earlier yesterday sued all four brokers and the former head of one of the day trading companies implicated in the alleged scheme.The indictment charges Ralph Casbarro, 43, who worked at Citigroup’s New York office; David Ghysels Jr., 47, formerly of Lehman’s Boca Raton, Fla., office; Kenneth Mahaffy Jr., 50, formerly of Merrill Lynch’s Garden City, N.Y., office and Citigroup’s Melville, N.Y., office, and Timothy O’Connell, 40, formerly of Merrill’s Garden City office.All four are charged with securities fraud and conspiracy to commit securities fraud. They’re also accused of receiving bribes in exchange for giving day traders access to internal communications over the firms’ squawk boxes.They face a maximum sentence of 25 years on each of the securities fraud and conspiracy counts and fines of $250,000. The indictment also alleges that Mr. O’Connell tried to conceal his illegal conduct by lying to federal agents and tampering with a witness who testified before a grand jury. On June 7, 2004, Mr. O’Connell lied when he told a U.S. Postal Inspector that he never gave anyone access to a Merrill Lynch squawk box, when in fact, he routinely provided day traders with such access, Ms. Mauskopf’s statement said.

Former Brokers Charged With Securities Fraud

Former Brokers Charged With Securities Fraud

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