Joseph F. Skowron, III was a Morgan Stanley Managing Director. On August 15, 2011, Skowron pleaded guilty to a one-count information charging him with conspiracy to commit securities fraud by engaging in insider trading and with obstructing an SEC investigation.
In connection with Skowron’s sentencing, Morgan Stanley sought an order requiring Skowron to make restitution to Morgan Stanley under the Mandatory Victims Restitution Act, 18 U.S.C. § 366A, which provides for mandatory restitution to victims in sentencing proceedings for convictions for, inter alia, offenses against property under Title 18. The United States District Court for the Southern District of New York granted that request in part, awarding Morgan Stanley restitution of over $10.2 million in total.
First, Morgan Stanley sought restitution for a $33 million fine it paid to the SEC to resolve claims the SEC brought again Skowron and related defendants. In denying this request, the court found that this amount was for the losses that Morgan Stanley avoided as a result of Skowron’s insider trading, and was not money that it was legally entitled to retain.
Second, Morgan Stanley sought restitution for $3.8 million that it spent in legal fees and related expenses in connection with the SEC investigation of Skowron. In awarding this amount, the court found that these expenses were directly and proximately incurred as a result of Skowron’s scheme.
Lastly, the court awarded Morgan Stanley $6,420,801 as reinbursement of 20% of the compensation it paid Skowron during the time of the wrongdoing, between 2007 and 2008. The court found 20% to represent the difference in the value of the services that Skowron rendered and the value of those services had they been rendered an honest employee. United States v. Joseph F. Skowron, III, 11 Cr. 699 (DLC) (S.D.N.Y. 2012).