Former Morgan Stanley Supervisor Convicted of Securities Fraud

A former Morgan Stanley Co. supervisor has been convicted of securities fraud for his role in a scheme involving kickbacks paid by the stock-loan industry.

Darren DeMizio was found guilty by a New York jury and faces up to 25 years in prison. He is the latest in a string of dozens of securities traders from numerous Wall Street firms who have admitted accepting millions of dollars in kickbacks from stock-loan “finders.”

Stock-loan finders are commonly used by securities firms to find inventories of stock then match borrowers and lenders.

DeMizio, formerly the head of Morgan Stanley’s domestic securities desk, admitted directing the firm’s stock-loan business to specific stock finders in exchange for bribes paid to his brother and father. The scheme began in the 1990s and continued through 2003, officials said.

DeMizio received about $1.6 million in bribes and kickbacks, according to federal prosecutors.

“Today’s conviction sends a clear message that the culture of corruption and kickbacks in the securities lending industry that victimized shareholders and the investing public will not be tolerated,” U.S. Attorney Benton Campbell of the Eastern District of New York said in a statement.

About 28 former and current traders at A.G. Edwards, Janney Montgomery Scott LLC, JPMorgan Chase & Co, Kellner Dileo & Co Inc., and Oppenheimer & Co. have pleaded guilty as part of the federal probe into kickbacks and bribes related to the use of stock-loan finders.

DeMizio was previously charged with civil crimes by the U.S. Securities and Exchange Commission.

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