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James Polese, 52, was sentenced by U.S. District Judge Mark Wolf
in Boston, who said he could not understand how the investment
adviser could be "so greedy and stupid" by carrying out the
fraud when he was already financially successful.
"It wasn't just wrong," Wolf said. "It was dumb, and it
inflicted harm on the people you cared about."
The proceedings came after a former employee of the New
York-based financial services firm who worked under Polese,
Cornelius Peterson, was sentenced in June to 20 months in prison
for participating in the scheme.
Polese, who pleaded guilty in April to investment adviser fraud
and bank fraud charges, in court apologized to his victims and
Morgan Stanley, which employed him as a Boston-based adviser.
"I'm sorry for tarnishing their name through my actions," he
said.
In addition to prison, Wolf also ordered Polese to pay a $30,000
fine and $462,000 in restitution jointly with Peterson.
According to court papers, in 2014, Polese and Peterson
transferred $100,000 from a Morgan Stanley client's account
without his permission to invest in a private equity fund
created to support a wind farm project.
Prosecutors said Peterson was on the fund's board of directors,
and Polese had himself invested money in the wind farm project,
which needed additional funding.
Both men later in 2015 used $400,000 from the account of an
elderly Morgan Stanley client, Ralph Bates, to back a letter of
credit in support of the project, causing him to incur $12,000
in fees, prosecutors said.
Without Bates' approval, in 2016 they also transferred $350,000
from his account, which was used for a real estate investment
and to pay for Polese's personal expenses, according to court
papers.
Polese also in 2017 used more than $93,000 from Bates' account
to make college tuition payments for two of his children and to
pay his own credit card bills, prosecutors said.
Bates, an 87-year-old philanthropist, said in court on Tuesday
that Polese had "ripped me off for big bucks.
"I'm at a loss for words," he said.
Morgan Stanley fired Polese and Peterson in June 2017 and has
said it terminated them immediately after uncovering their
misconduct.
The case is U.S. v. Polese, U.S. District Court, District of
Massachusetts, No. 18-cr-10028.
(Reporting by Nate Raymond in Boston; Editing by Dan Grebler)
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