A former Morgan Stanley financial advisor in El Paso, Texas, Jesus Rodriguez de la Cruz, was sentenced in federal court last week to 12 years in prison for perpetrating a multimillion-dollar fraud scheme in which he used client money for his own benefit, including a Lamborghini purchase.
Morgan Stanley lost over $5.5 million due to the former advisor's scheme, according to the Internal Revenue Service and the Justice Department, which both investigated.
From May 2018 to August 2021, Rodriguez, 46, defrauded Morgan Stanley and clients of money through materially false pretenses, representations and promises, authorities said in March 27 news releases, citing court documents. He orchestrated fraudulent transfers of funds from Morgan Stanley and client bank accounts to other bank accounts for his own benefit, they said.
(While the IRS and Justice Department identify the former advisor as Jesus Rodriguez de la Cruz, the Securities and Exchange Commission, which charged him in a civil fraud case last year, and the Financial Industry Regulatory Authority, which barred him in 2021, refer to him as Jesus Rodriguez.)
In one instance, Rodriguez created false communications and documents impersonating a client and submitted them to Morgan Stanley personnel to cause fraudulent transfers on the client’s line of credit account for personal profit, authorities said. One of these included a form that falsely claimed that the client had verbally authorized the transfer of $48,575 to buy real estate in El Paso.
Relying on the documentation, Morgan Stanley initiated the wire transfer from the client’s account to an account at a separate financial institution belonging to one of Rodriguez's family members, and one fraudulent transfer of about $125,000 from a client’s account to an account at another financial institution allowed Rodriguez to buy a Lamborghini, authorities said.
Rodriguez committed similar acts using other Morgan Stanley client accounts, according to the IRS and Justice Department, which said he didn't report any of the embezzled funds as income on his tax returns from 2017 through 2021, causing a $408,055 loss for the IRS.
A federal grand jury indicted Rodriguez in December 2023, and he was arrested Jan. 12, 2024. On Nov. 5, he pleaded guilty to one count of wire fraud, one count of engaging in a monetary transaction over $10,000 using criminally derived proceeds, one count of aggravated identity theft, and one count of making and subscribing a false income tax return.
“This defendant abused the trust of his clients and his responsibilities as a financial advisory to steal millions of dollars in customer funds in order to enrich himself,” said Margaret Leachman, acting U.S. attorney for the U.S. District Court for the Western District of Texas. “Today's sentence of more than a decade in federal prison demonstrates that perpetrators of fraud in this district will be investigated and brought to justice.”
“Rodriguez is the epitome of criminals fueled by greed that destroy the trust we place in those who handle our personal finances. He stole from his employer, his clients, and even personally recruited a victim to trust him as her financial advisor so he could hijack her accounts, after stealing her identity,” said Lucy Tan, acting special agent in charge of the IRS Criminal Investigation's Houston field office. “These complex financial schemes are why law enforcement agencies, like IRS-CI and the FBI, team up to help bring justice to victims and deter future criminals, like Rodriguez, from violating your trust.”
Said John Morales, El Paso's FBI special agent in charge, “The defendant exploited his position of trust as a financial advisor to deceive both his clients and employer for personal gain. Today’s sentencing demonstrates the FBI’s unwavering commitment to pursuing those who abuse their positions for financial fraud and ensuring they are held accountable."
A Morgan Stanley spokesperson told ThinkAdvisor by email Wednesday, "Morgan Stanley is strongly committed to the protection of client assets. Mr. Rodriguez has not been employed with the Firm since August 2021. The Firm reported allegations of Mr. Rodriguez’s misconduct to law enforcement shortly after allegations were raised and has been cooperating with law enforcement and regulators regarding the matter. Morgan Stanley reached out to clients and amicably resolved claims with impacted clients."
Rodriguez's FINRA record on BrokerCheck indicates that he was registered with Morgan Stanley from June 2009 to September 2021 and that he resigned in August 2021, following allegations that he used a client's credit line for his personal benefit. The record shows 17 disclosures, including multiple Morgan Stanley client complaints that he misappropriated funds.
The SEC, in its civil case, alleges that Rodriguez engaged in a fraudulent scheme to misappropriate over $3.4 million from at least 10 clients' accounts.
Rodriguez previously was registered with Citigroup and Merrill.
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