“A battle is brewing between major Wall Street firms over which one will foot the bill for the alleged misdeeds of a top-producing stockbroker,” writes Charles Gasparino in today’s Wall Street Journal.

“Federal authorities are investigating whether Frank D. Gruttadauria, a Lehman Brothers broker in Cleveland, cheated investors out of tens of millions of dollars over a 15-year period — at Lehman and his previous employers, SG Cowen Securities Corp. and Hambrecht & Quist — through a scheme in which he allegedly falsified brokerage-account statements for a group of wealthy clients, according to people familiar with the matter.”

“Lehman officials said Mr. Gruttadauria, 44 years old, may have misappropriated as much as $25 million from investors since joining Lehman, a unit of Lehman Brothers Holdings Inc., in October 2000. But the officials also say federal authorities are investigating whether Mr. Gruttadauria carried out the alleged scheme since he broke into the brokerage business with Hambrecht & Quist in 1987, and continued the activity when he joined Cowen in 1989.”

“Federal authorities are investigating whether he may have cheated investors during that time, the people say; some lawyers representing Mr. Gruttadauria’s clients estimate investor losses at more than $200 million. Mr. Gruttadauria, who had roughly 300 clients, couldn’t be reached to comment.”

“Wednesday, senior Lehman officials attempted to shift the blame outside the firm by telling brokers that most of Mr. Gruttadauria’s activities occurred when he was employed elsewhere — particularly at SG Cowen Securities, a unit of Societe Generale SA, and its predecessor firm, Cowen & Co., When Lehman bought the brokerage arm of SG Cowen in October 2000, Mr. Gruttadauria joined Lehman as the manager of its Cleveland office.”
Broker Under Scrutiny

“A spokesman for Lehman declined to comment, other than to say the firm ‘continues to work’ with federal and local authorities investigating the matter. But people close to Lehman say the firm is planning to speak to SG Cowen about assessing the damages to determine which firm is responsible for what — as well as questioning Cowen officials about whether the firm could have overcharged Lehman in selling its brokerage unit.”

“Officials at SG Cowen say they have just been informed about the entire matter, and pointing the finger at them would be premature.”