Pearson was embezzling client funds in 1993

Cork stockbroker Mr Stephen Pearson embezzled client funds as far back as 1993 to cover trading losses similar to those which caused the dissolution of W & R Morrogh's yesterday.

The Cork stockbroking firm, which has 9,300 clients and incurred losses totalling £7.9 million (€10 million), was wound up by Ms Justice Carroll in the High Court yesterday.

In an affidavit to yesterday's hearing, the Central Bank's head of securities, Mr Con Horan, said the Bank was gravely concerned that it had not been informed that Mr Pearson had used client money to cover his futures trading debts in 1993.

The losses were found out by other partners in the firm and the amount was made good by his father, Mr Peter Pearson, at that time.

Mr Horan said no report was made to the Stock Exchange or the Central Bank on the matter.

The partners of Morrogh, Mr Alexander Morrogh, who owns 60 per cent of the firm, and Mr Stephen Pearson, 40 per cent, remain liable for the £5.5 million which remains outstanding after an injection of £2.4 million already paid by the partners.

The court-appointed receiver, Mr Tom Grace of PricewaterhouseCoopers, said he had visited Mr Stephen Pearson, the junior partner in the firm, in St Patrick's Hospital, Dublin.

In a saga not unlike that of rogue trader Mr Nick Leeson, who destroyed Britain's Barings Bank through his ill-fated futures trading in 1995, Mr Pearson said he had become involved in gambling futures and options and his losses led him to fraudulently embezzle funds from clients.

Mr Pearson said he was the only one involved in the fraud and neither staff nor partners were aware of what he was doing.

Mr Grace said it would take considerable time to establish whether all potential creditors of the firm had been identified and to agree all the liabilities of the firm.

As the Investor Compensation Scheme has a ceiling of £15,700 (€20,000) for investors who lose money in such circumstances, Morrogh's bigger clients remain at risk to lose investments above that amount.

Ms Justice Carroll refused an application by Mr Pearson's solicitor, Mr Michael Hanahoe, to have the case adjourned for a week. Mr Hanahoe said as his client was in hospital Mr Pearson's family were dealing with the matter on his behalf.