Affidavit Says Broker Generated False Accounts For 110 Clients

By PAUL SINGER, Associated Press Writer

CLEVELAND (AP) - A stockbroker suspected of defrauding clients kept false accounts for about 110 customers and reported inflated values of $277 million, according to an FBI affidavit unsealed Monday.

Frank Gruttadauria, 44, is suspected of conducting a 15-year scam while working as a broker for various firms, including SG Cowen Corp. and Lehman Brothers Inc. He disappeared Jan. 11 but surrendered Saturday to the FBI in Cleveland.

He was charged with making false statements to a financial institution and was to be arraigned Monday afternoon in U.S. District Court.

The charge stems from a $6 million line of credit Gruttadauria (pictured, above) received in December from National City Bank. According to the affidavit, he told the bank he had $13 million in assets in a Lehman Brothers account, but that account actually had a value of $6.55.

Gruttadauria drew $700,000 from the line of credit on Dec. 21, and $300,000 on Jan. 9, the FBI alleges.

The affidavit signed by FBI agent William Henterly Jr. alleges that Gruttadauria had a secret computer system in his office to generate false reports for his clients.

Henterly said Gruttadauria's computer showed the accounts for the 110 clients totaled $289 million while Lehman Brothers' official records showed they were worth $12 million.

Previous reports indicated that Gruttadauria allegedly had sent false account statements to 25 investors. It was not immediately clear whether other investors among the 110 may have been misled about their accounts.

When Gruttadauria disappeared, he sent letters to the FBI and his female live-in companion and reportedly admitted stealing from investors. He also left behind data he said would detail his years of shifting money from one account to another until the money ran out.

Gruttadauria, from the Cleveland suburb of Gates Mills, is being held without bond as a federal prisoner in the city jail in suburban Euclid.

He had worked at Lehman Brothers since Oct. 10, 2000, when the company purchased the business of New York-based SG Cowen Securities Corp., Gruttadauria's former employer in Cleveland.

FBI agents said Saturday that Gruttadauria lived on the run in Colorado Springs, Buffalo and Cleveland. Agents found his car three days ago in the Cleveland area.

One of Gruttadauria's former clients, real-estate developer Bob Fazio, said Sunday that he wanted him to divulge whatever information he has about client accounts.

"I want to resolve this as fast as I can and get on with my life," Fazio said.

(Copyright 2002 by The Associated Press. All Rights Reserved.)