An Associated Person from Staten Island, NY, while employed by New York Position Services Group ("NYPS"), allegedly misappropriated customer and firm funds from unreconciled suspense accounts at the firm - apparently after finding a wrinkle in the system. Richard Garaventa entered ... the securities industry in 1998 as a nonregistered associate of Morgan Stanley.  From there we went to work for NYPS, where he stayed until his termination on 1/7/09.  On or about 1/8/09, NYPS's Compliance Department contacted FINRA Enforcement and disclosed that the Firm terminated the Garaventa upon discovering that he had misappropriated approximately $2 million by manipulating the Firm's journal and check systems.  On 2/25/09, the firm reported that Garaventa had been arrested and charged with Grand Larceny, Criminal Possession of Stolen Property and Falsifying Business Records. New York Position Services Group was in the business of ... processing corporate actions by journaling money and securities to and from the customer accounts that were affected by the corporate action.  To aid this process, the Firm established separate suspense accounts for each corporate action. The Firm debited securities and/or funds from the affected customer accounts and credited them to the appropriate suspense account.  The funds and/or securities were then distributed from the suspense accounts to DTC, after which DTC journaled the funds and/or securities back to the suspense account, and then the Firm credited the funds and/or securities to the affected customer accounts. Typically, at the end of this process, the suspense account had a zero balance. On occasion a balance remained in a suspense account after the funds/securities were credited to the affected customers' accounts.  When this occurred, NYPS members were responsible for reconciling the differences and returning the remaining balances to the appropriate customer accounts. NYPS also issued checks to complete certain corporate actions. Check requests, which included the CUSIP number, payee, amount of the check and to whom the check was to be delivered, were entered into the Firm's electronic system by an NYPS employee and electronically forwarded to the Firm's Treasury Department.  Prior to the check being forwarded to Treasury it had to be approved by another NYPS employee. Garaventa originally was employed as a NYPS Associate and given responsibility for processing corporate actions related to US and Canadian securities.  In 2001, he was promoted to Manager;  in 2003 he was promoted to Senior Manager, Finance.  In these positions, he oversaw the processing of certain corporate actions and was responsible for resolving unallocated fund balances related to those actions. In 2006, Garaventa was promoted to VP, Operations - which gave him responsibility for all operational facets of the corporate actions processed by NYPS, including the review of journal entries associated with the corporate actions. He reviewed all journal entries until June 2008. FINRA Allegations of Misappropriations. FINRA found that Garaventa misappropriated customer and firm funds from various sources.  He entered, or caused to be entered, false journal entries and false check requests into the firm’s electronic system to effect transfers, credits and finally withdrawals for his own benefit. First Group of Misappropriations. Between September 2002 and February 2007, Garaventa put through false journal entries to transfer and credit nearly $60,000 of unreconciled customer funds to other NYPS suspense accounts that Garaventa was using to misappropriate funds.  In or about 2006, he also used false journal entries to credit over $120,000 received from an SEC settlement fund and due to customers.  These funds also were transferred to the other NYPS suspense accounts Garaventa was using to misappropriate funds. Garaventa then placed into the Firm's electronic system check requests for 5 checks to be issued to NY Transfer against the suspense accounts that Garaventa was using to misappropriate funds.  One of the checks was drawn from a suspense account that contained only unreconciled corporate balances and one was drawn from a suspense account that contained only SEC settlement funds;  3 of the checks were drawn from suspense accounts that also contained funds from other Firm sources. In this way, Garaventa misappropriated at least $179,744 of customer funds for his own benefit. Second Group of Misappropriations. Between 8/3/99 and 12/19/2008, Garaventa put through false journal entries into the Firm's electronic system to transfer and credit about $1,786,052 from different Firm sources - including the Firm's Fee and Foreign Exchange accounts, leftover balances from corporate actions and accumulated ADR fees, commingled with funds from other sources, to the NYPS suspense accounts that he was using to misappropriate funds. He then put through requests for 43 checks to be issued to NY Transfer against those funds.  Thirty-nine of the checks were drawn from suspense accounts that contained funds transferred only from Firm sources; 3 of the checks were drawn from suspense accounts that also contained commingled funds belonging to Firm customers;  1 check was drawn from suspense accounts that also commingled funds belonging to a Firm counterparty. In that last case, in February 2008, the Firm counterparty calculated a payment to the Firm related to a corporate action based on an incorrect tax withholding rate, which resulted in a $1,000,000 overpayment by the counterparty.  The overpayment was credited to an NYPS suspense subaccount.  Between February and July 2008, Garaventa misappropriated $320,000 of the $1 million by using journal entries to move the money into suspense account he was using to misappropriate funds. Garaventa then had NYPS employees who reported to him enter check requests on his behalf, for issuance to NY Transfer.  Garaventa later approved the check requests and, used the ID# and password of another NYPS employee who reported to him, to enter the requests.  One of the 6 checks also contained funds from other Firm sources. Third Group of Misappropriations, Followed by FINRA Allegations. On 3/2/09, FINRA sent a letter to Garaventa requesting that he provide a detailed explanation of allegations into whether he misappropriated money from the firm.  That was the beginning of the end. Garaventa refused to cooperate with FINRA investigation. On 1/19/10, Garaventa was sentenced to 2-6 years in a NY state prison and his criminal matter was closed. FINRA Sanctions. Garventa agreed to being barred from the industry in settlement of FINRA charges.  [FINRA Disciplinary Actions for August 2011]. For further details, go to:   [FINRA AWC #2009017072301].