Former Officer at Paine Webber Indicted in N.Y. : Firm’s Highest-Paid Broker Accused in Laundering of $700,000 for Customers

A former vice president of and star stockbroker for the Paine Webber brokerage was indicted by a federal grand jury Thursday on charges of taking part in a money-laundering scheme in which he and other employees allegedly doctored records to disguise customers’ large cash deposits.

Gary D. Eder, 41, the company’s most productive and highest-paid broker between 1982 and 1986, was charged in connection with a scheme that took place at a Manhattan branch office of the brokerage between 1980 and 1983 and involved $700,000 in cash, according to the indictment.

Under federal law, brokerages, banks and other financial institutions are required to file so-called currency transaction reports with the Internal Revenue Service on all transactions involving more than $10,000. The law is intended to help the government combat tax evasion and to keep track of income from illicit sources, such as drug trafficking, prostitution and weapons smuggling.

No Word on Others

According to the indictment, Eder broke up large deposits into sums of less than $10,000 to avoid such reporting requirements. He did so with the “approval and participation of conspirators who were supervisors in the Paine Webber branch office,” the indictment charges.

Assistant U.S. Atty. David Spears said the investigation is continuing, but he declined to comment on whether other Paine Webber employees may also face charges.

The indictment does not specify why Eder would wish to help customers evade taxes but, if he actually did what he is accused of doing, he may have wanted to reduce the customers’ taxes to increase the amount of trading capital from which he earned his commissions.

Dan Geller, an attorney representing Paine Webber, said the brokerage is “anxious that all of the facts of the case be known. We are cooperating fully.” He declined, however, to say whether Paine Webber was undertaking an investigation of its own or whether other employees had been suspended or subjected to any other disciplinary action for their roles in the scheme.

Geller said Eder was suspended Jan. 22 and resigned Feb. 17.

Spears said Eder received cash in sums as large as $70,000. In some cases, he deposited it in accounts in the clients’ names over a period of several days.

On some occasions, the prosecutor said, Eder used clients’ cash to buy bank checks in amounts just under $10,000, then deposited them in the customers’ accounts.

Eder and co-conspirators destroyed “daily cash summary folders” that listed all cash transactions at the branch, at 1221 Avenue of the Americas in Manhattan, Spear said. The folders were destroyed for each business day in 1981, 1982 and 1983, the indictment said.

Eder’s attorney, Milton Gould, said Eder has taken another job “in private business,” but he declined to describe the position more specifically.

Gould would not comment on how Eder intends to plead to the charges.

If convicted, Eder faces a maximum sentence of 10 years in prison and a maximum fine of $260,000.

Transaction reporting requirements are not new, but federal prosecutors have recently become far more active in pursuing such charges. Last year, a federal appeals court upheld the conviction of Alan Heyman, a former Merrill Lynch broker who had falsified some records and destroyed others in a scheme similar to that which Eder is now accused.

Heyman was sentenced to three years’ probation.

A year ago, in a case involving 17,000 violations of banking laws, Bank of America was penalized a record $4.75 million for failing to report large cash transactions. Not long afterward, Security Pacific National Bank agreed to pay a civil penalty of $605,000 in connection with 2,400 violations. In 1985, in two other major cases, Bank of Boston and Bank of New England were fined $500,000 and $1.24 million, respectively, for failing to report all such cash transactions.