FINRA barred California broker Patrick Joseph Donohue, formerly of Morgan Stanley Smith Barney, for engaging in an outside business activity without providing written notice to his firm, making false statements associated with this activity and making further misstatements in connection with processing multiple wire transfers that were perpetrated by a fraudster pretending to be an elderly customer.
During the period from January 2007 through June 2012, Donohue allegedly provided services to elderly customers and the estates of deceased or otherwise incapacitated customers who maintained trust accounts at Morgan Stanley. The investigation states these services constituted outside business activities in that Donohue assisted clients and trusts with the preparation of financial audits and other tax-related preparations.
For instance, Donohue held the role of Health Care Power of Attorney for one customer for nearly nine years until the customer's death in 2012. During that time, Donohue allegedly neglected to complete and submit a Fiduciary Appointment Exception Request Form for firm review, as per Morgan Stanley's written supervisory policies and procedures. The investigation states Donohue likewise failed to provide Morgan Stanley with any other type of written or verbal notice of his appointment to this fiduciary position.
Firm policy at the time also prohibited Donohue from withdrawing funds from firm accounts in connection with this undisclosed outside business activity; because he received nearly $60,000 in connection with this illicit activity and drafted and signed a check from one trust's firm account for $4200, he converted customer funds in violation of firm and FINRA rules.
The investigation indicates Donohue exacerbated the misconduct by making a series of false statements on six annual compliance questionnaires, specifically making misstatements on two firm forms in connection with processing two wire transfers from a firm customer's account.
According to FINRA, Donohue falsely wrote on these forms that he had received the wire transfer requests via telephone, as per firm policy. The investigation contends that in actuality, Donohue did not receive any such telephone request and instead received the requests in an e-mail.
The investigation continues, stating that this distinction is significant because the e-mails that Donohue received were bogus, having been written by an imposter who hacked into a firm customer's e-mail account to effect wire transfer fraud.
Because of the propensity of e-mail-initiated wire fraud, Morgan Stanley and other FINRA firms routinely require brokers and general securities representatives to verify wire transfer instruction requests with the account holder by telephone.
Accordingly, Donohue's falsified forms allowed Morgan Stanley to effect two unauthorized wire transfers to the tune of $63,000. Donohue's misstatements also caused the firm to maintain inaccurate books and records in violation of industry rules.
If you have invested with Patrick Joseph Donohue, Morgan Stanley or with any broker or firm whose unauthorized, undisclosed or otherwise illicit outside business activity, falsification of documents or fiduciary negligence has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.