A former Chicago stockbroker who was missing for nearly a month after leaving an incriminating letter about his handling of clients’ money is being held without bond in Cleveland.
Meanwhile, an FBI affidavit released Monday claims that the broker kept false statements on up to 30 clients with 110 different brokerage accounts, some of whom are from the Chicago area. The value on those accounts was inflated by roughly $277 million, according to the FBI documents.
Frank Gruttadauria, 44, appeared in federal court Monday on a charge of making false statements to a financial institution in relation to a $6 million credit line he received from National City Bank.
Additional charges are possible, said Bill Edwards, spokesman for the U.S. attorney’s office.
“It’s going to take a lot of people a lot of time to figure out everything,” he said.
Gruttadauria’s hearing will be continued on Thursday, during which time bond should be set and other details worked out, an FBI spokeswoman said Monday.
The only charges currently pending against Gruttadauria involve a credit line he received from National City in December. According to the affidavit, he told the bank he had $13 million in assets in a Lehman Brothers account, but the 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, according to the affidavit.
Authorities suspect Gruttadauria of conducting a 15-year scam while working as a broker for various firms, including SG Cowen Corp. and Lehman Brothers Inc. He began to work at Cowen in 1989 in Cleveland, shortly after his job with the Chicago office of Hambrecht & Quist was eliminated when the office closed in the aftermath of the October 1987 stock market crash.
Lehman purchased Cowen’s private client business in 2000. A Cowen spokesman declined to comment on the matter.
“I certainly feel glad he turned himself in, and I’m happy he’s not dead,” said Breda Stout of Elgin, a former client of Gruttadauria’s.
Stout said her mother-in-law, 86-year-old Golda Stout, remained a client until Gruttadauria disappeared. At one point, the family said, Stout’s account statements showed a portfolio worth $2.5 million.
“If I saw him right now, today, I wouldn’t say a word to him. There’s no point,” Breda Stout said.
About two dozen other customers, representing 110 Lehman Brothers accounts, are affected, a Lehman spokesman said Monday. Although the clients thought their accounts were worth $289 million, they are actually worth $12 million today, the spokesman said. In total, Gruttadauria had about 200 clients.
Lehman officials are still attempting to determine the clients’ cost basis in their accounts, meaning the amount of money actually deposited. Authorities do not yet know how much money was misappropriated from the accounts, and how much was lost in the market downturn of the last couple of years.
The broker apparently kept a secret computer system at his Cleveland office that helped him generate false monthly statements to clients, the FBI said in court papers.
When Gruttadauria disappeared Jan. 11, he sent a letter to the FBI admitting he had stolen from investors, officials said. He also left behind data that he said would detail his years of shifting money from one account to another until the money ran out.
FBI agents said he spent time while in hiding in Colorado Springs; Buffalo, and Cleveland. Agents found his car last week in the Cleveland area. The FBI said Gruttadauria obtained an Ohio driver’s license under an alias that enabled him to buy a $33,000 Chevrolet Tahoe and rent a home in Colorado Springs.
