Bad Broker Served As Compliance Officer's Supervisor
February 20, 2002 at 6:32 PM EST - Updated July 26 at 11:01 PM
CLEVELAND (AP) - The stockbroker suspected of cheating clients out of a possible $277 million also supervised the employee who was in charge of ensuring brokers complied with securities laws.
Broker Frank Gruttadauria (pictured, right) was manager of the Cleveland office of Lehman Brothers and was the boss of compliance officer Robert L. Semenak who was fired last week along with the operations manager, a secretary and an administrative employee.
Although Gruttadauria served a dual role as broker and Semenak's supervisor, the firm's compliance procedures met regulatory requirements, said Lehman spokesman William Ahearn.
Gruttadauria, 44, of Gates Mills, is suspected of conducting a 15-year scam while working as a broker for Lehman Brothers and SG Cowen Corp. He kept false records for about 100 accounts of 25 families and reported inflated account values, according to an FBI affidavit.
He surrendered Feb. 9 to authorities after spending a month as a fugitive and is being held without bond on a charge of making false statements to a financial institution. Federal officials say more charges are possible.
Semenak, 47, of Euclid, was fired "for cause," Ahearn said Tuesday. He declined to elaborate further on Semenak's firing or cite reasons for the dismissals of the other three.
A message was left Wednesday at Semenak's home seeking comment.
Semenak told The Wall Street Journal that he did nothing wrong and that Lehman told him he was fired for a matter unrelated to Gruttadauria's alleged fraud. But he told the newspaper he is being made a scapegoat for the firms' failure to detect Gruttadauria's alleged activities.
Semenak and operations manager Melinda Trocano were largely responsible for ensuring the office ran smoothly and complied with securities laws.
Both Semenak and Trocano had worked with Gruttadauria for 12 years, first at SG Cowen and then at Lehman.
Semenak told the newspaper that he saw nothing wrong with Gruttadauria's accounts and that he rarely checked them.
"I never felt that there was anything that was an issue," he said.
Three brokers and two other administrative workers remain in Lehman's Cleveland office, Ahearn said.
(Copyright 2002 by The Associated Press. All Rights Reserved.)