Tax Issues Haunt High-Profile OpCo/Morgan Stanley Manager
(Updates 11th paragraph to show that Marchassalla was convicted of a misdemeanor in 1999.)
Michael Marchassalla has built a strong reputation over a 22-year career managing branches and recruiting brokers for Morgan Stanley and other firms in the hypercompetitive New York City market. Because he also appears to have had problems keeping up with his tax obligations and disclosing his lapses, he is about to be suspended from the industry.
Currently a managing director at Oppenheimer & Co., Marchassalla agreed to step down from all securities industry activities for two months and from serving in a principal role for another three months, according to his BrokerCheck report in the Financial Industry Regulatory Authority’s database.
Without admitting or denying the findings of Finra’s enforcement division, he also agreed to pay a fine of $10,000.
The Long Island resident failed to update his U-4 registration forms to show five unsatisfied state and federal tax liens from 2007 through 2013 and an unsatisfied civil judgment, while employed at Morgan Stanley and Smith Barney, according to BrokerCheck. The civil judgment involved a bank-foreclosed property in Vermont owned by Marchassalla and his wife that had a mortgage balance of more than $638,000.
The tax liens, all of which he has subsequently discharged, included $76,671 of federal taxes owed for tax years 2007 through 2009 and another $62,844 assessed in 2012, according to BrokerCheck.
“I’m not in a position to comment,” Marchassalla said in a brief phone conversation on Wednesday.
His two-month suspension from any securities industry job is scheduled to begin in two weeks, and his subsequent three-month suspension from serving as a principal will run through Oct. 12, 2016, according to BrokerCheck.
Finra officials are accelerating efforts to prosecute lapses that could reflect character flaws in advisors and supervisors, part of a campaign to inculcate stronger compliance cultures at brokerage firms and in their hiring and supervisory procedures. Finra rules require registered representatives to disclose tax liens within 30 days of notification.
Morgan Stanley in March fired disgraced broker Ami Forte for, in part, failing to disclose liens imposed on her by tax authorities, according to regulatory filings. Morgan Stanley was also undoubtedly influenced by its having to pay a $34 million arbitration settlement over charges that Forte churned a wealthy client’s account.
Marchassalla’s history of tax indiscretions began early in his career.
In 1999, he was charged with “repeated failure” to pay personal income taxes in New York, resulting in a tax debt of more than $72,000 over a three-year period in which he had reported adjusted gross income of $1.2 million. He was ultimately convicted of a misdemeanor, paid $5,000 and served 250 hours of community service, according to BrokerCheck.
Marchassalla remains highly regarded among advisors and outside recruiters. In his 22 years as a broker and manager at Morgan Stanley and predecessor firms Smith Barney and Shearson Lehman Brothers, he advanced to become manager of some of its largest Manhattan offices and complexes.
Morgan Stanley, however, “allowed him to resign” in 2013 after discovering several attempts he made to replenish negative balances in his in-house account with checks that were returned for insufficient funds, according to BrokerCheck. The overdrafts were inadvertent because of an electronic transfer mistake in one of his accounts, Marchassalla commented in a filing with regulators.
Oppenheimer hired him as managing director in charge of business development one month after he left Morgan Stanley, according to his LinkedIn page.
Marchassalla began his brokerage career at Merrill Lynch in February 1985, and was discharged by the firm in 1992, according to BrokerCheck.