In response to the filing of a Complaint on September 27, 2012, by the Department of Enforcement of the Financial Industry Regulatory Authority ("FINRA"), Respondent Glen William Albanese submitted an Offer of Settlement dated November 13, 2012 which the regulator accepted. Under the terms of the Offer of Settlement, without admitting or denying the allegations in the Complaint, Respondent Glen William Albanese consented to the entry of findings and violations and to the imposition of the sanctions. FINRA Department of Enforcement, Complainant, vs Glen William Albanese, Respondent (Offer of Settlement, 2011026992101, November 26, 2012).
Albanese was registered with Needham & Company, LLC ( the "Firm") from April 1997 until his termination on February 25, 2011. In 2000, Albanese became the Firm's Chief Financial Officer and Financial Operations Principal.
Among Albanese's Chief Financial Officer duties, he was responsible for the approval of payment for vendor invoices. During the relevant period of 2006 through 2010, the Firm had written procedures in place for submitting and approving vendor invoices:
The Offer of Settlement alleges that Albanese did not comply with these procedures for certain vendors, specifically:
As to the vendor invoices noted above, the Offer of Settlement alleged that Albanese converted the funds for the benefit of the vendors or himself when he bypassed the accounts payable department by having the vendors send their invoices directly to him for his approval. Also, the Offer of Settlement alleged that Albanese's attendance at the World Series game with the individuals listed on the invoice was not a legitimate business expense.
Sometime in January or February 2011, the Firm's Controller prepared, at the request of the Firm's CEO, a spreadsheet of payments to vendors who provided recruiting and consulting services to the Firm for the period 2006 through 2010.
Albanese instructed the Controller to reduce the annual amounts paid by the Firm to a staffing services company - Albanese provided new annual amounts (dramatically reducing the staffing services payments by $950,850) to the Controller, who subsequently changed the spreadsheet as directed by Albanese. Albanese further altered the spreadsheet by deleting an information technology services vendor, removing $85,000 in payments made between 2007 and 2010. The altered spreadsheet was provided to the Firm's CEO.
Failure to Respond
Following FINRA's initiation of an investigation, Albanese failed to respond to January 18, and February 9, 2012, demands for information.
Adding Up The Tab
The Offer of Settlement alleges that Albanese converted funds belonging to his employer by knowingly:
By allegedly altering and falsifying information contained in a spreadsheet, creating false records concerning expenses, causing the firm to maintain inaccurate books and records, and failing to respond to FINRA demands for information and documents, Albanese was charged with having violated FINRA Rule 2010, NASD Rule 3110, and FINRA Rule 8210.
In accordance with the terms of the Offer of Settlement, FINRA ordered that Albanese be barred from associating with any FINRA-member firm in any capacity.
Albanese was a CFO and FINOP, and given those two important titles, he just can't engage in the shenanigans disclosed in this case - Needham & Co. was not his personal piggybank. Of course, FINRA's sense of moral outrage doesn't always seem to apply to the big boys at the big firms. For example, remember this incident:
The Perfect Office
No longer content with the corner office or the penthouse in hues of teakwood, former Merrill Lynch CEO John Thain, whose tenure drove Merrill Lynch to lose $15 billion in the fourth quarter of 2009, spent $1,405 on a trash can. As his company was eliminating jobs, a newly acquired $87,000 rug graced the floor of his office.
Most executives hire interior designers, and Thain was no exception hiring Michael Smith, of celebrity design fame. The tab for his designer office - $1.2 million.
"5 Outrageous CEO Spending Abuses and Perks" (Forbes "Personal Spending" byInvestopedia, August 3, 2011)
Thain's questionable office expenses in 2008 were well documented and have become the stuff of legend - and, yes, in the face of public outrage, he purportedly repaid the full cost of the renovation. On the other hand, did FINRA or any regulator bring charges against him for submitting those outrageous bills in the first place?
Over the years, I have frequently written about business expense cases. They hit at every level of Wall Street - at Goldman Sachs, Merrill Lynch,Morgan Stanley, JP Morgan, Wells Fargo. Sometimes it's a shlub who tried to get away with buying some Christmas presents while pretending they were business expenses. Sometimes it's a misguided hot-shot broker or trader who takes a few pals and clients to a strip joint. Sometimes it's a member of the C-suite who pays hundreds of thousands of dollars to decorate the office. For example, consider these cases:
In terms of folks Mickey Mousing around with expenses, who could forget FINRA's Department of Enforcement v. Tina Newman (OHO 2008011719501, March 30, 2011), in which registered person Newman was Barred for improper use of her corporate credit card. FINRA alleged that Newman improperly:
Accordingly, FINRA alleged that Newman improperly used her member firm's corporate credit cards to pay for a personal vacation and misappropriated her firm's credit card rewards points for her personal use. Subsequently, Newman reimbursed her firm for the charges but not for the credit card rewards points. FINRA found that she intentionally created fictitious and false entries in the firm's books to cover up her conversion of firm funds for her personal benefit.
Of course, there's always the classic FINRA Department of Enforcement v. Matthew S. Kaplan (OHO 20070077587, June 28, 2008), where Kaplan was Barred for using a corporate credit card for escort services! If you would like to read a truly unusual regulatory decision, I would recommend this one to you. After all, where else might you find such a tidbit as this?:
On June 18, 2003, Kaplan had dinner and drinks with MP, a friend who also was a portfolio manager for one of Kaplan's clients at Lazard. They discussed MP's marital difficulties, and Kaplan suggested using an escort service as a solution to MP's problems. Kaplan agreed to pay for the service, although MP did not know that Kaplan intended to pay for it with his Lazard charge card. Kaplan made the arrangements for the escort service and then met MP at a hotel where they availed themselves of the services offered by Exotica/Ce Soir. Although the charge was personal and not an appropriate business expense, Kaplan claimed that the $4,950 Ce Soir charge was for concert tickets for MP to see Bruce Springsteen at Giants Stadium. Lazard paid the charge . . .