Ex-Lehman Broker Pleads Guilty to Fraud

Frank Gruttadauria, a former broker with Lehman Bros. Holdings Inc. and SG Cowen & Co., pleaded guilty Wednesday to stealing $40 million from 50 clients by falsifying account statements.

The former Cleveland branch chief for the two brokerages pleaded guilty to securities fraud, mail fraud, identity theft and making false statements to a bank, said Bill Edwards, first assistant U.S. attorney in Cleveland. He will be required to make restitution.

Gruttadauria, 44, was at the center of one of the biggest cases of broker fraud in recent years. The matter led to congressional hearings earlier this year in which the Securities and Exchange Commission acknowledged conducting brokerage audits that didn’t catch his wrongdoing.

Gruttadauria didn’t commit the crimes for personal gain, said his lawyer, Joan Synenberg. “He never took a penny for himself,” she said. “He stole Peter to pay Paul. He never stole Peter to pay himself.” She declined to elaborate.

The broker was charged with fraud earlier this year on allegations that he inflated the value of clients’ accounts by $277 million.

Gruttadauria could get 6 1/2 to eight years in prison.