Eight people charged with stock-loan fraud

Eight people were charged Thursday in a series of alleged schemes involving kickbacks and fraud at the stock-loan desks of Wall Street brokerage firms.

Four of the defendants pleaded not guilty to conspiracy to commit securities fraud and money laundering in federal court in Brooklyn. The rest were either expected to be arraigned or to surrender later.

Prosecutors initially announced that six people had been charged, but later revealed two more people were named in a separate indictment. Among the eight were former stock loan supervisors at Morgan Stanley and Janney Montgomery Scott.

Morgan Stanley spokesman Mark Lake said the firm was cooperating with the investigation, adding that the allegations were in “direct violation of the firm’s values and policies.”

Janney issued a statement saying its “involvement with this matter ended some time ago.”

The charges are part of a continuing industrywide investigation into allegations of bribery and kickbacks in the securities lending industry, also called the stock-loan industry. So far, 26 people have been charged and 18 have pleaded guilty.

Indictments allege that the crimes revolved around large brokerage houses’ practice of borrowing and lending securities among themselves. The investigation revealed that stock-loan traders funneled millions of dollars in fees to “finders” -- people who located stocks to cover short sales -- in exchange for cash bribes, prosecutors said.

If convicted, the defendants face as many as 25 years in prison, although the terms could be much shorter under federal sentencing guidelines.