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Morgan Stanley puts broker on leave in madam case

By Joseph A. Giannone

NEW YORK (Reuters) - Morgan Stanley said it has placed broker David S. Walker on leave, after prosecutors said a 44-year-old mother of four accused of running a brothel had visited the firm to discuss an online prostitution venture.

Manhattan prosecutors arrested Anna Gristina of Monroe, New York, on February 22 on charges of promoting prostitution. She pleaded not guilty. During her February 23 arraignment, prosecutors said she was arrested after meeting a Morgan Stanley employee at one of the firm's Manhattan offices to discuss an online venture for matching male clients with female prostitutes.

Walker, a Morgan Stanley Smith Barney broker, is that employee, a source familiar with the situation said on Wednesday. Morgan Stanley said on Thursday that he had been placed on administrative leave until an investigation was completed. Morgan Stanley declined further comment.

The source familiar with the matter said on Thursday that Walker has denied any involvement in any illegal activity. An internal Morgan Stanley probe has so far found no evidence to the contrary, nor has the firm found any evidence of involvement by other employees, the source said.

Walker has not been charged with any wrongdoing.

On Wednesday, Walker told a local news website, DNAinfo.com, that Gristina had "many other connections" at Morgan Stanley.

Walker could not be reached for comment at his Morgan Stanley office. Gristina's lawyer, Peter Gleason, could not be reached for comment.

During Gristina's arraignment, New York Assistant District Attorney Charles Linehan told a Manhattan Criminal Court judge that "she had been at the Morgan Stanley banker's office for a meeting in which she was trying to solicit money to fund what we believe is another illicit venture on the Internet that involves matching male clients with female prostitutes."

Morgan Stanley searched its visitor records looking for the employee who had met with Gristina. The source said the investment bank learned of Walker's involvement with Gristina on Wednesday.

Prosecutor Linehan said at the arraignment that Gristina's indictment stemmed from a five-year investigation involving hundreds of hours of surveillance of her and her associates and 50 to 100 hours of audio and video recordings.

Gristina was charged with third-degree promotion of prostitution. She is due back in court May 3 and could face up to seven years in prison if convicted.

The news came a week after another Morgan Stanley employee, investment banker William Bryan Jennings, was arrested by police in Darien, Connecticut, on charges he stabbed a New York taxi driver on December 22. Police said Jennings made racial slurs against the Egyptian-born driver.

Regulatory records show that Walker has been a broker since 1988 and that he was an employee of Morgan Stanley Smith Barney or its predecessor firms since 1999.

Walker spent the early part of his career at Bear Stearns, Lehman Brothers and Smith Barney before joining Merrill Lynch in 1994, according to Walker's FINRA records.

He jumped to Morgan Stanley Dean Witter in 1999, joined Citigroup's Smith Barney in 2005, but ended up back at Morgan Stanley when the investment bank acquired control of Smith Barney in 2009.

The FINRA records show he was involved in one customer dispute, a 2004 "account mismanagement" complaint with no specified damages that was denied by arbitrators.

(Reporting By Joseph A. Giannone; Additional reporting by Joseph Ax; Editing by Walden Siew, Gary Hill)

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