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Ex-Morgan Stanley Broker Gets One Year in Scheme

By Thom Weidlich

A former broker for Morgan Stanley and Bank of America Corp. was sentenced to one year and a day in prison for receiving kickbacks in a stock-loan scheme.

Salvatore Zangari, 34, was sentenced today by U.S. District Judge John Gleeson in Brooklyn, New York. When he pleaded guilty April 15, Zangari admitted that he conspired in a plan that resulted in the payment of sham fees to a purported stock-loan finder. The scheme lasted from March 2004 to December 2005, prosecutors said.

“Stupidity. I really can’t sit here and justify what I did,” Zangari told the judge when asked why he participated.

Zangari’s guilty plea marked the 32nd conviction obtained as part of an investigation of the stock-loan industry, according to Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch in Brooklyn. The probe focuses on allegations that employees took bribes or purported finder fees, often when no services had been rendered.

Zangari’s crime called for a sentence of 1 1/2 to 2 years under federal guidelines, prosecutors said.

“I’m here today to take full responsibility for my actions,” Zangari said in court. “I have no excuse for what I’ve done.”

Cash Payments

Zangari, of New York City, received more than $187,000 in kickbacks in the scheme, according to prosecutors. He paid back $65,600, the amount that was deposited in his bank accounts, prosecutors said. Zangari was accused of conspiring with another former Morgan Stanley broker,Peter Sherlock, who pleaded guilty in March 2008 to taking illegal kickbacks and died at age 38 before he was to be sentenced.

“He obviously knew what he was doing in getting these cash payments at discreet locations,” Assistant U.S. Attorney Winston Paes said about Zangari in court today.

The judge said that U.S. financial markets are regulated in part by making sure those who skirt the law are punished to deter others.

“I think the sentence requires a period of incarceration but not the period requested by the government,” he said.

Zangari must surrender Jan. 14. Gleeson said he would recommend the federal prison in Fort Dix, New Jersey, at Zangari’s request.

‘Mystifying’

Zangari’s case was “mystifying” because, with no dependents and making “north of a couple hundred thousand a year,” he didn’t need the money from the scheme, the judge said.

“I am mystified that this crime got committed,” he said.

One of Zangari’s lawyers, Randy Zelin of Westbury, New York, told the judge his client has expressed more concern about how his actions have affected his family and friends than how they have affected him.

“Judge Gleeson gives the people in his courtroom a fair shake,” Zelin said in a phone interview after the hearing. “This is a classic example of human frailties and judges having to wrestle with good people doing bad things.”

The U.S. Securities and Exchange Commission said in a March complaint that Zangari had been employed as a stock-loan trader for 11 years at several Wall Street brokerage firms where he was responsible for “negotiating, arranging and entering into stock-loan transactions” on behalf of the firms.

Friends

The SEC said he worked most recently at UBS AG, from October 2006 to July 2009. He was at Bank of America from May 2005 to October 2006 and at Morgan Stanley from August 1998 to May 2005, according to the SEC.

Loans of stock are made to an investor who is selling short, or betting the price will drop, to cover delivery of the shares to the buyer.

The SEC said that Zangari and Sherlock, of East Norwich, New York, were friends, and that Sherlock approached him in March 2004 to ask if he was “interested in making some extra cash” by participating in the kickback scheme.

The case is U.S. v Zangari, 10-cr-00255, U.S. District Court, Eastern District of New York (Brooklyn).

To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, federal court attweidlich@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

Source: http://www.bloomberg.com/news/2010-10-29/ex-morgan-stanley-broker-gets-one-year-in-scheme.html