Two Ex-Morgan Stanley Brokers in Boston to Plead Guilty to Fraud
(Updated with comment from Morgan Stanley.)
Two former Morgan Stanley brokers in Boston who were fired in June on allegations of misappropriating client funds have agreed to plead guilty to federal fraud charges, according to an announcement Wednesday from the U.S. Attorney’s Office in Massachusetts.
James Polese, 51, and his partner Cornelius Peterson, 28, transferred $500,000 out of two client accounts from 2014 to 2017 without the clients’ knowledge or consent, and used the money for a wind farm project, other investments and personal expenses, prosecutors said.
Polese and Peterson were each charged with one count of conspiracy and investment advisor fraud and three counts of bank fraud. Polese was charged with an additional five counts of bank fraud and aggravated identity theft, according to the release.
Polese did not immediately return a call for comment, and Peterson could not be reached for comment.
The brokers withdrew $100,000 from a client account in August 2014 to invest in the wind farm project without authorization by Morgan Stanley, and in May 2015 withdrew $400,000 from another client’s account to support a letter of credit for the project, prosecutors said. In 2017, Polese made multiples withdrawals and transfers from a client account to pay college tuition and credit card bills, among other personal items, according to the announcement.
Morgan Stanley immediately terminated Polese and Peterson after it uncovered the fraud through “internal supervision,” a spokeswoman said in an email.
“Morgan Stanley is strongly committed to the protection of client assets, and to act quickly when fraudulent activity is uncovered,” she said in an e-mailed statement. The company, which was not identified by the U.S. Attorney by name, referred the incidents to regulators and law enforcement, the spokeswoman wrote.
AdvisorHub has previously reported that at least one client, Ralph Bates, an 86-year-old Boston-area philanthropist who made his fortune through real estate investing, had been interviewed by the Federal Bureau of Investigation. Bates, who became suspicious after Poles asked him to sign several withdrawal forms, said in August that Morgan Stanley had made him whole and that he remains a client of the firm.
Polese worked at Morgan Stanley’s 53 State Street branch since May 2010. He previously spent five years as an advisor with UBS Financial Services and eight years previously at Prudential Securities and its successor, Wachovia Securities.
Peterson has been with Morgan Stanley since the start of his career as a registered representative in 2011, according to his BrokerCheck history.
Charges of conspiracy and investment adviser fraud each carry a possible sentence of five years in prison and a fine of $250,000 or twice the losses, according to the U.S. Attorney’s announcement. Federal sentencing policies for bank fraud call for a similar fine and a maximum sentence of 30 years, while aggravated identity theft required a mandatory term of two years in prison.