Doug McKelvey, an ex-broker from Morgan Stanley, based in Southlake, Texas, confessed to embezzling over $1.5 million from his mother and mother-in-law, as per the U.S. Attorney’s Office in the Eastern District of Texas.
Doug M. McKelvey, aged 58, conceded to money laundering charges and potentially faces a decade in prison, announced the U.S. Attorney’s office.
Between June 2013 and February 2022, McKelvey executed 300 deceitful wire transfers, funneling the funds for his personal use, such as vacations, fine dining, cruises, and more, revealed the Securities and Exchange Commission (SEC). The SEC filed civil charges against the ex-broker on Tuesday.
At times, McKelvey would shift money into a trust account under his control, falsely claiming he had verbal permission from the account owner, as per the civil lawsuit.
In certain situations, McKelvey had designated the account details of a client as the payment instruction for his and his spouse’s credit card at a separate bank, identified by prosecutors as Citibank. Morgan Stanley’s compliance system didn’t necessitate approval from the account owner for ACH transfers initiated by external entities like Citibank, the SEC disclosed.
To generate cash, McKelvey sold stocks or utilized securities-backed credit lines in client accounts. He also sent a counterfeit account statement to his mother-in-law to conceal his fraudulent activities, as per the SEC and prosecutors.
McKelvey’s attorney, Heather Barbieri of Barbieri Law Firm in Plano, Texas, expressed that her client “feels remorse for his actions and is determined to rectify the situation.”
Barbieri stated, “Mr. McKelvey has continually cooperated with legal authorities and the courts and pledges to persist in his cooperation.”
McKelvey launched his career at UBS Wealth Management USA in 2002 and later transitioned to Morgan Stanley in 2008, through its predecessor, Smith Barney.
This incident marks the second time in two months that a former Morgan Stanley broker has been in the limelight over allegations of extended fraud.
In May, Shawn E. Good, a former broker from North Carolina, was sentenced to over seven years in prison for embezzling $7.25 million from clients over a decade, from 2012 to 2022. Like McKelvey, Good misused clients’ securities-backed credit lines and admitted to wire fraud and money laundering charges in September.
A representative for Morgan Stanley confirmed the company had terminated McKelvey in April 2022 upon uncovering his unauthorized activities and misappropriation of funds from a few client accounts belonging to his relatives.
The company has reportedly reached a satisfactory settlement with his family members.
According to McKelvey’s BrokerCheck profile, Morgan Stanley settled two distinct client complaints concerning the misappropriation of funds. One grievance lodged in February was resolved in May for $450,000, and another from May 2022 was settled for $1.4 million in September.
McKelvey did not contribute to the latest settlement, but he and his spouse added $200,000 to the September settlement, as recorded by BrokerCheck. The Financial Industry Regulatory Authority barred McKelvey in August for failing to provide the requested information.
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