“Federal authorities are investigating whether a Lehman Brothers broker cheated investors out of tens of millions of dollars over a 15-year period through a scheme in which he falsified brokerage-account statements for a group of wealthy clients, people familiar with the matter say,” writes Charles Gasparino in today’s Wall Street Journal.

“The broker, Frank Gruttadauria, has been missing since Jan. 11, after sending what local agents of the Federal Bureau of Investigation have said was a note describing in detail how he falsified account statements, inflated investor holdings and improperly took millions of dollars of client funds, people at Lehman say. The FBI, which received the letter earlier in the month, notified Lehman about the matter last Thursday, people at the firm say. Lehman, a unit of Lehman Brothers Holdings Inc., has referred the case to the Securities and Exchange Commission and the National Association of Securities Dealers.”

” ‘William Ahearn, a Lehman spokesman, said in a statement that the firm “is working closely with the FBI and the local authorities to solve this.” Spokesmen for the FBI and the SEC declined to comment on the matter. Mr. Gruttadauria couldn’t be reached to comment.’ “

“The case has stunned Lehman officials. Mr. Gruttadauria, 55 years old, had been working at Lehman’s Cleveland, Ohio, branch office since October 2000, joining the firm when Lehman bought the brokerage arm of S.G. Cowan Securities from Societe Generale SA, a French bank. Lehman Brothers alleges that since that time, Mr. Gruttadauria may have misappropriated as much as $25 million from investors. Officials at Cowan, who say they learned about the inquiry Tuesday, declined to comment.”

“But the $25 million accounts for just part of the potential issue, people at Lehman say. They say federal authorities are investigating whether Mr. Gruttadauria carried out the alleged scheme since he broke into the brokerage business with Hambrecht & Quist Inc. in 1987, and whether he has inflated clients’ profits over that time by $250 million, or possibly more.”

“It is unclear how much of that amount Mr. Gruttadauria could have kept for himself during this time, the people familiar with the matter say, but one senior Lehman executive says the total could be ‘a multiple’ of the $25 million investigators say he may have improperly taken while at Lehman. H&Q, now part of J.P. Morgan Chase & Co., declined to comment.”

” ‘If these numbers turn out to be accurate, this appears to be the largest scam of retail investors ever’ by an individual broker, says New York securities lawyer Jacob Zamansky. ‘It certainly eclipses the high-profile boiler-room cases of the early 1990s.’ “