Morgan Stanley Broker Admits Plot Involving Disabled Children

The Wall Street Journal reported that Charles Winitch, a Morgan Stanley (MS) broker, pled guilty to participating in a scheme to defraud in a White Plains federal court. He is scheduled to be sentenced on March 18, 2011 and faces up to 20 years in prison and fines up to $250,000. Mr. Winitch was fired by Morgan Stanley on August 29, 2005 and charged in October 2006 with inappropriate conduct relating to certain guardianship accounts by the New York Stock Exchange Division of Enforcement. Based upon his conduct, the Financial Industry Regulatory Authority (FINRA) censured Winitch and suspended him for five years. Winitch reportedly stated that he did not know the beneficiaries of the funds were disabled children.

The accounts involved were for the long term care and living expenses of disabled children who received substantial sums of money from medical malpractice claims. In nearly all the cases, the parents of the children had no other funds other than what was received from the settlements and they were financially unsophisticated, although the Morgan Stanley new account forms indicated they had six figure incomes, multi-million dollar net worth and were interested in trading and speculation. According to the report, the broker engaged in short term trading of municipal bonds and treasury strips generating over $563,000 in commissions and fees. A court order had dictated that the funds were to be invested conservatively, according to the article.

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