Cleveland rogue trader turns himself in to FBI

"I am Frank Gruttadauria and I need to turn myself in." These words, from a man who walked into the FBI Cleveland office on Sunday evening, ended a month-long hunt for another rogue trader making the news in the United States.  Conor O'Clery, International Business Editor, on Wall Street, reports

Unlike the currency trader who lost $750 million (€859.5 million) at Allfirst in a year's trading, Mr Gruttadauria was by his own admission guilty of calculated fraud over 15 years. Working as a securities broker in several Wall Street firms, he stole an estimated $125 million to $300 million from 25 wealthy clients for his own use.

The 41-year-old investment broker was head of Lehman Brothers office in Cleveland until he disappeared on January 11th, leaving a note for his girlfriend saying: "I am not the man you think...remember Joe Black" (a reference to an enigmatic character played by Brad Pitt in the 1998 film Meet Joe Black). His case, like that of Mr John Rusnak at Allfirst, highlights an astonishing failure of controls at big financial institutions, and further erodes public trust. Both men were respectable members of the community but allegedly spent much energy creating phoney transactions.

The extent of deception by Mr Gruttadauria of clients with whom he was personally friendly is breathtaking. For example, Mr Robert Fazio, a member of a prominent Cleveland family, dined often with the broker and travelled with him to New York, but after he disappeared found his $3.5 million account held only $4,200.

Another victim was Mrs Golda Stout, an 86-year-old grandmother whom he often visited and fussed over. She believed her account held $2.5 million but discovered it now has just $86,000. Even an aunt of Mr Gruttadauria found that her account was emptied.

The broker siphoned money from clients' accounts into accounts he created for himself, and then sent false statements to the account holders while posting the real statements to post office boxes he controlled. Whenever a client needed a withdrawal from an account that was empty, Gruttadauria would transfer money from someone else's account. While on the run he shaved his moustache and travelled to Colorado where he rented an apartment. But the investment broker was recognised there and the FBI were on his trail.

In a letter to the FBI after he fled, Mr Gruttadauria said he acted alone and didn't take money for personal use. However, he had a $1.5 million house, owned a half share in a private jet and a ski condominium in New York, and was a member of exclusive clubs. He wrote that lax supervision made it possible for him to misappropriate money over a 15-year period.