(Bloomberg) -- Morgan Stanley sued to recover more than $3.6 million it paid to defend a former broker who was imprisoned for his role in a kickback scheme.
The firm said in its complaint against ex-broker Darin DeMizio that he should repay legal costs because he intentionally defrauded Morgan Stanley and concealed his fraud while working at the New York-based brokerage.
DeMizio was convicted in 2009 of scheming to pay $1.7 million in kickbacks to his father and brother for virtually no work, according to the complaint filed in Manhattan federal court. DeMizio, who joined Morgan Stanley in 1991, was sentenced to 38 months in prison and ordered to pay the firm $1.2 million in restitution.
Morgan Stanley has sued other ex-employees who it claims deceived the bank. In 2012, it filed a fraud suit against Joseph Chip Skowron, a former hedge fund manager sentenced to five years in prison for insider trading. In January, the bank said it would drop its suit after a judge ordered Skowron to repay $31 million in compensation.
In its complaint against DeMizio, Morgan Stanley cited evidence from his trial in federal court in Brooklyn, New York, that showed hed hid his scheme from the bank.
That included testimony from an employee who worked for DeMizio that he not tell the firms attorneys about the plot, his use of coded language and his request that trading records be destroyed, according to the complaint.
A federal appeals court in Manhattan this year upheld DeMizios conspiracy conviction. David Spears, the lawyer who represented DeMizio in his criminal case, didnt immediately respond to a voice-mail message seeking comment on the lawsuit.
DeMizio is now in a residential reentry facility, according to the U.S. Bureau of Prisons website.
The case is Morgan Stanley v. DeMizio, 14-cv-03764, U.S. District Court, Southern District of New York (Manhattan).
- Morgan Stanley Loses Two Advisors Teams With More than $400M AUM
- U.S. Tax Probe Expands to 13 Swiss Banks
- Morgan Stanley Appoints New Head of Private Wealth Management