Washday Blues

At first glance, Herbert Cantley of Huntingdon Valley, Pa., seems an unexceptional 46-year-old man who earns an honest living renovating and painting houses. But that is only his latest career. Last year he was fired from his job as a sales manager at the Philadelphia office of Shearson Lehman Bros., a New York-based brokerage firm, after authorities began investigating % large unreported currency transactions at the company. Last week that investigation finished with a flourish: a federal grand jury indicted Shearson Lehman, Cantley and six other people on charges of laundering $1.2 million for an illegal gambling syndicate.

The 63-count indictment alleges that between September 1982 and July 1985 Cantley and five of his accomplices, including Joseph Vito Mastronardo Jr., the son-in-law of former Philadelphia Mayor Frank Rizzo, operated a $1 million-a-week, five-state gambling ring. They hid their profits, the indictment states, by changing cash into bank checks and money orders, which then made their way into numerous Shearson accounts. The funds were mostly used to buy municipal bonds. Thus the defendants allegedly managed to launder their gambling proceeds by putting them into legitimate investments.

In a rare move, the grand jury charged that Shearson managers and employees knew about the money-laundering scheme. Now a subsidiary of American Express, Shearson is also accused of violating the federal Bank Secrecy Act, which requires that financial institutions report to the Internal Revenue Service all cash transactions in excess of $10,000. If convicted, Shearson faces a maximum fine of more than $16 million. While several banks have been charged with money laundering, it is unusual for a brokerage firm to be indicted for that offense.

Shearson denied all charges. A prepared statement called the indictment "unprecedented . . . an unfortunate abuse of prosecutorial discretion." The firm said that Cantley was a "disloyal former employee" and that if he and his associates had broken any laws, they did so in "violation of Shearson Lehman's own policies." Through his attorney, Cantley asserted his innocence. If convicted, the former broker could be sentenced to 198 years in prison and fined $16 million.

The indictment hardly improves the tarnished reputation of Wall Street dealmakers. Last year E.F. Hutton pleaded guilty to a check-kiting scheme. The Securities and Exchange Commission said in May that it had cracked the largest insider-trading case ever: the $12.6 million scam allegedly engineered by Dennis Levine, a former managing director at Drexel Burnham. The Shearson indictment is the latest chapter in a continuing saga of Wall Street scandal. No one is calling it the last.