Ex-Broker Cops to Syndicate Kickback Scheme
A former broker with Stifel, Nicolaus & Co. pleaded guilty on Tuesday to “engaging in a commercial bribery scheme” for taking illegal kickbacks in exchange for giving clients favorable allocations of popular stock offerings, according to an announcement from the U.S. Attorney’s Office in New Jersey.
Brian Hirsch, who worked on the wealth syndicate desk at Stifel and Barclays Capital in New York, received as much as $1.5 million in illegal payments between 2012 and 2016 as part of an arrangement in which he gave three clients preferential access to hundreds of initial and secondary public offerings, according to the U.S. Attorney’s office and a separate civil complaint filed in New Jersey district court by the Securities and Exchange Commission.
The scheme netted over $4 million in profits for one client, Joseph Spera, a former day trader who earlier this month pleaded guilty to insider trading in a separate case, the SEC said. The Commission, which did not name the other clients, is seeking disgorgement as well as civil monetary penalties from Hirsch, 42, and Spera, 56.
”Kickback schemes are pernicious and have no place in the securities markets,” said Sanjay Wadhwa, senior associate director for enforcement in the SEC’s New York region, in a statement. “Hirsch lined his own pockets by secretly sharing in customer trading profits that he engineered in violation of his obligations to his employers.”
Hirsch’s lawyer, Elliot G. Sagor, a partner at Mintz & Gold in New York, did not return a call for comment, and a lawyer for Spera, Alain Leibman at Fox Rothschild, also did not return a call for comment.
Neither the SEC nor the U.S. Attorney’s Office identified Stifel or Barclays in filings, but the SEC said that Hirsch’s activities began at “Firm A” and then continued when he joined “Firm B” in December 2015 by acquisition, a timeline that aligns with the completion of Stifel’s acquisition of Barclays’ U.S. brokerage unit and Hirsch’s BrokerCheck report.
Spokespeople for Stifel and Barclays declined to comment. The SEC said its investigation is ongoing.
Policies at both firms prohibited brokers from engaging in quid-pro-quo arrangements and typically required shares be allocated to “key customers with more capital for long-term investments” who would be beneficial to the issuers or those who did more business with the firm, according to the SEC.
Hirsch, who resigned from Stifel this month, took steps to conceal the fraud, including lying to the firms on quarterly and annual compliance questionnaires and requesting that Spera and the other clients deliver the payments in cash increments under $10,000 to avoid triggering anti-money laundering reports, according to the SEC complaint. The payments were delivered to Hirsch in an envelope that was handed off outside his office or in bars or restaurants, the SEC said.
Hirsch, who began his career at Dean Witter Reynolds in 1997 and also worked at Lehman Brothers before joining Barclays in 2008, according to BrokerCheck, used a portion of the money for personal expenses, including to pay contractors working on his house, and kept the remainder in a safe deposit box, the SEC said.