Report: Bad Broker Also Tapped Accounts For Charity Gifts
March 7, 2002 at 6:20 PM EST - Updated July 27 at 4:10 AM
CLEVELAND (AP) - A Lehman Brothers Inc. broker suspected in a $277 million investment swindle tapped client accounts to make six-figure charitable contributions, a newspaper reported.
The Plain Dealer reported Thursday that Frank Gruttadauria, 44, of suburban Gates Mills, took money from client accounts to give money to favored charities, churches and cultural projects.
Among the benefactors: $100,000 to help complete filming the movie "The Year That Trembled," $135,000 to a church near San Diego and a $100,000 interest-free loan to a community organization in Cleveland's Little Italy neighborhood.
The gift to the movie occurred last summer as executive producer Andrew Rayburn was seeking investors to help his small-budget film company pay the bills. Rayburn asked his broker and friend, Gruttadauria, whose check helped the crew finish production.
The $100,000 wasn't Gruttadauria's: It came from Rayburn's account without his knowledge, according to Securities and Exchange Commission documents.
In recent years Gruttadauria (pictured, above) sent $135,000 to a client's church, the Village Community Presbyterian Church in Rancho Santa Fe, Calif., near San Diego. The SEC said the money came from the account of another client, Robert Johnston of Naples, Fla.
Gruttadauria, 44, has been in the Trumbull County Jail since shortly after he surrendered to the FBI on Feb. 9 after nearly one month as a fugitive.
Gruttadauria, who is suspected of conducting a 15-year scam while working as a broker for Lehman Brothers and SG Cowen, has been charged with making false statements to a financial institution. Federal authorities say more charges are possible.
Two years ago Gruttadauria sent a $100,000 check to the Chicago Youth Centers, money that also came from Johnston's account without his knowledge, according to SEC records.
"It was outrageous how he would use his investors' money and represent it as his own to enhance his reputation to clients and the public," said Kris Treu, Johnston's lawyer.
Gruttadauria, who was a board member of United Cerebral Palsy of Greater Cleveland for 5½ years, sent the group a $25,000 check -- also from a client account that he controlled.
In late 2000, Gruttadauria made an interest-free $100,000 loan to the Alta House social service agency in Cleveland's Little Italy. Alta House repaid the loan last year.
(Copyright 2002 by The Associated Press. All Rights Reserved.)