Ex-Morgan Stanley, Wells Broker Sentenced to 30 Months for Fraud
A former broker with Morgan Stanley and Wells Fargo Advisors in New York, was sentenced to two-and-a-half years in prison for stealing $1.6 million from 11 clients, according to an announcement on Wednesday from the U.S. Attorney’s office in New York.
Between 2011 and 2018, Hafen convinced his clients to transfer money to his personal account in order to invest in an outside fund with guaranteed returns of at least 6%, according to court documents. Hafen, who is 64 and worked as a broker for 39 years, created fictitious investment statements and used the funds to pay for his “lavish lifestyle,” including custom men’s accessories and an art collection, according to prosecutors, who sought a sentence between 46 and 57 months.
The announcement does not name Morgan Stanley, where Hafen worked between 2008 and 2018, or Wells Fargo, where he spent the last six months of his brokerage career, according to his BrokerCheck record. Wells terminated him in August 2018 for admitting to “financial arrangements with clients that were not approved by the firm,” according to the database.
A spokeswoman for Morgan Stanley declined to comment on Hafen.
“At Wells Fargo Advisors we hold our advisors to the highest professional standards,” Wells spokeswoman Kim Yurkovich said in a statement. “The advisor involved in this matter is no longer with the firm.”
Hafen’s lawyer, E. Scott Schirick at Pryor Cashman in New York, did not return a call for comment. They had requested a sentence of three months in a memorandum that included letters from two of his victims who asked the court not to incarcerate Hafen.
The Financial Industry Regulatory Authority barred Hafen in October 2018 for failing to cooperate with its investigation, according to BrokerCheck, and a civil charge from the Securities and Exchange Commission is still pending.
Hafen started his career at Merrill Lynch in 1979 and worked at several firms, including 17 years at Bear, Stearns & Co., before joining Morgan Stanley in 2008, according to BrokerCheck.
Separately, days before Hafen’s sentencing, another former Morgan Stanley broker in New Jersey who was serving time for stealing $5 million from three clients from 2015 to 2016, moved in the opposite direction.
Federal Judge Victor Marrero of the Southern District of New York ordered Barry F. Connell released from prison on January 31, finding that the three years he had already served were sufficient. Marrero also credited Connell, who pleaded guilty to fraud charges in December 2018, with “substantial assistance” in the prosecution of others, according to a report in “Law 360.”
“We’re quite happy with that,” Connell’s lawyer, Jesse M. Siegel, said. “That was the appropriate sentence under these circumstances.”
Siegel declined to comment on the assistance that Connell had provided.
Since his arrest in Nevada in February 2017, Connell, 53, has cost Morgan Stanley millions in regulatory settlements and arbitration and also resulted in at least one former branch manager’s departure.
Morgan Stanley in June 2018 agreed to pay a $3.6 million penalty to the SEC for allegedly failing to supervise Connell.
It has also paid $7.6 million in settlements of customer complaints made against Connell since November 2016, according to his BrokerCheck record. The payments include $6 million paid to claims tied to allegations that Connell withdrew funds without their authorization between 2015 and 2016.
It also reached a separate $1.35 million settlement in arbitration with two relatives of Connell, including his mother, and a related irrevocable insurance trust, who claimed that funds had been misappropriated from their accounts between 2009 and 2014.
A Morgan Stanley spokeswoman noted in a statement that the firm “promptly” fired Connell after learning of his fraud in November 2016 that it has compensated the three clients who were affected.
The spokeswoman declined to comment on whether it had recouped the $300,000 in upfront signing bonuses tied to promissory notes that arbitrators ordered Connell to repay. Prior to joining Morgan Stanley, Connell spent 10 years at UBS Wealth Management USA, according to his BrokerCheck. Finra barred the broker in 2017.