Money from 20 clients used to cover losses

SOME 20 clients of the collapsed W&R Morrogh Stockbroking firm were defrauded to the tune of around €5 million.

The Circuit Criminal Court in Dublin heard yesterday that over a period of six years, Morrogh’s junior partner, Stephen Pearson, fraudulently converted millions of euro of clients’ money to cover losses he had racked up on futures and options trading.

Mr Pearson has pleaded guilty to 47 charges, ranging from fraudulently converting money for his own use or benefit and forgery. He will be sentenced later this year.

Mr Pearson spoke only to plead guilty after each charge was read out. He sat in the court yesterday surrounded by members of his family. Also in court was Alex Morrogh, the senior partner in the firm and Mr Pearson’s cousin.

The court was told by Detective Sergeant Denis Heneghan the details of the charges against Mr Pearson and the sums of money that was misappropriated from clients’ accounts to pay for his losses.

Mr Justice Desmond Hogan heard that instructions by Morrogh clients to buy particular shares were not acted upon, though Mr Pearson provided these clients with forged documents to prove he had. The money was then used for Mr Pearson’s own purposes.

Mr Pearson also set up accounts using fictitious names and accounts for people whom he knew without their knowledge, including his wife. In one case, Mary Layden, who had bought shares to provide an income for her old age invested £102,847 with Mr Pearson. In June 1998 he sold shares without Ms Layden’s permission and the money was then transferred to another account, called Bullbear, which was used by the stockbroker to trade in the futures market.

It also emerged Mr Pearson would use funds in different client accounts to top up the deficits he had made in others. In one case, a young man called Frank Keane who wanted to sell his investments and go travelling with the proceeds, was given funds from another client’s account.

Cornelius Cronin, a young farmer, invested £72,500 with Morrogh in May 1996. This money was used to reimburse a charity in Cork, whose funds had been taken by Mr Pearson and used elsewhere. Mr Pearson was the treasurer of the L’Arche charity and used its funds for his use, though he ensured the charity never suffered a loss.

The court was also told that Alec Morrogh, the senior partner had invested €3 million of his own funds to help compensate clients and would face bankruptcy proceedings when the receivership ends.

Morrogh, placed into receivership in May 2001, was 40% owned by Mr Pearson and 60% by Mr Morrogh.

Sentencing was adjourned until October 12 while the judge studied garda evidence and medical reports.