‘Brazen’ scheme: Ex-Morgan Stanley advisor pleads guilty to $6M fraud

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A former Morgan Stanley advisor bilked his clients out of $6 million using fake account statements, bogus email addresses and even a victim’s home phone, according to federal prosecutors.

Michael Barry Carter, 47, pleaded guilty last week to federal charges of wire fraud and investment advisor fraud. His victims included elderly clients and a nonprofit sports organization in Northern Virginia, according to the U.S. Attorney’s Office for the District of Maryland.

Carter used the misappropriated funds to pay off hundreds of thousands of dollars in credit card bills, country club membership fees, a “substantial” home mortgage and a luxury car, according to the U.S. Attorney’s office and the SEC, which filed civil charges against Carter this week.

“For over 12 years, Michael Carter perpetrated a brazen scheme that defrauded victim account holders whose investments he was supposed to protect,” U.S. Attorney Robert K. Hur said in a statement.

Carter’s attorney could not be reached for immediate comment.

Working for Morgan Stanley in Tysons Corner, Virginia, Carter made more than 50 unauthorized transactions in his clients’ accounts beginning in October 2007, according to federal prosecutors. To hide the thefts, Carter allegedly forged signatures on bank authorization forms and created false financial statements.

In one instance, Carter met a client at her home and used her telephone to authorize transactions to thwart a financial institution’s mandatory multifactor verification system, authorities say.

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After the client died at age 98, the advisor allegedly moved on to bilk another elderly investor, authorities say.

Carter carried on with this scheme until July 2019, according to authorities. It was then that a client and her adult daughter unwittingly uncovered the fraud when they attempted to obtain a bridge loan to cover relocation costs to an assisted living facility and discovered that an $800,000 loan had already been obtained in the client’s name without her knowledge or permission, according to authorities, who did not name the client.

The funds had been sent to Carter’s personal bank account, authorities say.

Morgan Stanley discharged Carter, an advisor of 18 years, in July 2019 citing “allegations he misappropriated client funds,” according to a note from the company contained in his FINRA BrokerCheck record.

The firm acts “quickly when fraudulent activity is uncovered,” said a Morgan Stanley spokeswoman, in a statement. “The advisor’s employment was terminated as soon as his activity came to our attention, and we immediately reported the matter to the appropriate law enforcement and regulatory authorities and have been cooperating with their investigations. There were a limited number of clients impacted and any money misappropriated by the advisor was returned,” the spokeswoman said in a statement.

FINRA barred Carter from the industry in September 2019.

Before his fraud was uncovered, Carter had returned more than $1.8 million to his victims, according to authorities. As part of his plea agreement, Carter is required to pay an additional $4.3 million.

Carter currently faces a maximum sentence of 20 years in federal prison for wire fraud and five years for investment advisor fraud. His sentencing has been scheduled for Nov. 9.

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Securities fraud Wirehouse advisors Financial crimes Morgan Stanley SEC U.S. Attorneys Office FBI
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