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Morgan Stanley headquarters in New York

Regulation and Compliance > Litigation

Ex-Morgan Stanley Advisor Pleads Guilty to Money Laundering

By Jeff Berman

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A former Morgan Stanley advisor and broker who misappropriated more than $1.5 million from two older clients who are his close relatives pleaded guilty to money laundering charges on Tuesday, according to court documents and Damien M. Diggs, U.S. attorney for the Eastern District of Texas.

Doug McKelvey, 58, who had also been a vice president for Morgan Stanley, pleaded guilty to the federal violations before U.S. Magistrate Judge Kimberly C. Priest Johnson in U.S. District Court for the Eastern District of Texas, Sherman Division.

According to information presented in court, from 2009 to 2022, McKelvey “misappropriated at least $1.5 million” of investor funds held in brokerage accounts. “The funds were supposed to be invested on behalf of his clients,” according to Diggs. McKelvey instead “used the funds to pay for personal trips, cruises, restaurants, salons, and other personal expenses,” Diggs said.

McKelvey faces up to 10 years in federal prison, according to Diggs.  “A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office,” Diggs added in a press release on Wednesday.

Barred From The Industry

McKelvey entered the securities industry in 2002, when he joined UBS Financial Services and became a registered broker, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck.org website. He went on to join Citigroup Global Markets as a broker in 2008 but left one year later to join Morgan Stanley.

On May 5, 2022, Morgan Stanley filed a Form 5 Uniform Termination Notice stating he was discharged one month earlier over “allegations regarding representative’s unauthorized activity and misappropriation of funds from client accounts, which were held by relatives of the representative,” according to his report on BrokerCheck.org and the FINRA letter of acceptance, waiver and consent he signed on Aug. 19, 2022.

In signing the AWC letter, he consented to be barred from associating with any FINRA member firm in all capacities.

“Morgan Stanley detected McKelvey’s unauthorized activity and misappropriation of funds from a limited number of client accounts held by his relatives,” a spokesperson for the wirehouse told ThinkAdvisor by email on Thursday. “Morgan Stanley terminated McKelvey and amicably resolved the matter with his relatives.”

Commenting on Thursday, Heather Barbieri of the Barbieri Law Firm in Plano, Texas, said by email: “Regarding the recent developments surrounding our client, Doug McKelvey, who has pleaded guilty to fraud charges, we would like to state that Mr. McKelvey has consistently demonstrated his cooperation with law enforcement and the courts — and will continue to do so. He regrets his actions and is committed to making amends.”

SEC Charges

In a separate complaint filed Tuesday in U.S. District Court for the Northern District of Texas, Fort Worth Division, the Securities and Exchange Commission charged McKelvey with fraud for misappropriating over $1.7 million from two elderly brokerage customers who were close relatives of his.

The SEC’s complaint alleged that, from June 2013 to February 2022, while employed as a registered representative and investment advisor representative in the Southlake, Texas office of a “large financial institution,” McKelvey initiated more than 300 fraudulent and unauthorized disbursements of funds from the two clients’ accounts.

McKelvey also allegedly sold securities from his clients’ accounts to generate some of the funds he misappropriated and attempted to conceal his misconduct, the SEC alleged.

The SEC seeks permanent injunctive relief, the disgorgement of allegedly ill-gotten gains plus prejudgment interest, and a civil penalty, it said.

(Morgan Stanley headquarters in New York; Photographer: Victor J. Blue/Bloomberg)

Jeff Berman

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