Michael Carter, formerly associated with Morgan Stanley (MS), and has admitted to investment fraud, now stares down the prospect of incarceration. The allegations against Carter pinpoint a 12-year-long fraudulent scheme that financially strained five clients, with one senior client losing a staggering $6 million.
Upon discovery of the scam, Carter commenced the repayment to the victims from investor funds. The sentencing is slated for November 9. The terms negotiated with the Department of Justice (DOJ), however, suggest a likelihood of a lesser penalty than the maximum stipulated. Official DOJ reports assert that from October 2007 to July 2019, Carter executed multiple unauthorized client account withdrawals.
In a series of over 50 transactions, Carter funneled these unauthorized amounts to his personal accounts. Shockingly, he also secretively loaned $800k under a client’s name and even pilfered more than $50,000 from a sports-related charity. Despite his plea deal, where he commits to reimburse the victims, he might still face a prison term stretching up to 25 years.
Robert Hur, the US Attorney for the District of Maryland, commented on the situation, stating, “Michael Carter conducted a glaringly illicit operation for over a decade, betraying the trust of clients who believed he would safeguard their investments.”
The fraud surfaced when the daughter of one elderly victim approached Morgan Stanley for a loan to transition her mother into assisted living. It was then revealed that an $800,000 loan had already been sanctioned under the victim’s name, flagged by DOJ as Victim 1.
Michael Carter, with a commendable 18-year tenure in finance, has brief stints at Ameriprise (AMP), Merrill Lynch, Financial Network Investment Corporation, and Dean Witter Reynolds. The Financial Industry Regulatory Authority’s BrokerCheck webpage revealed Carter’s illicit loan transactions. Subsequently, after dual investigations, Morgan Stanley severed ties with Carter in July 2019.
The Imperative of Brokerage Oversight
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Legislation mandates brokerages to vigilantly monitor their agents. Should an agent commit any unlawful act under the firm’s banner, the firm might have to bear the liabilities resulting from such fraud or negligence. Given the prolonged duration of Carter’s fraud, Morgan Stanley could potentially face multiple lawsuits. The case inevitably sparks questions about the covert operations of other brokers and financial advisors.
Suspension for Ex-Ameriprise Broker, Bryant Caveness
Bryant Edwin Caveness, previously associated with Ameriprise Financial Services, faces suspension from the Financial Industry Regulatory Authority (FINRA). The decision followed Caveness’s reluctance to engage with FINRA’s probe into his controversial exit from the firm.
His termination document indicates a dismissal on grounds of professional misconduct and fraud. There are hints that Caveness’s questionable activities might have affected long-standing clients who possibly discreetly terminated their association with the firm. Although Caveness neither confirmed nor refuted the allegations, he acquiesced to the sanctions through an acceptance, waiver, and consent (AWC) document. FINRA continues its investigations, now focusing on potential frauds targeting elderly clients.
