WASHINGTON (AP) _ Gruntal & Co. Inc. agreed Tuesday to pay nearly $12 million in civil fines and restitution to settle charges involving a decade-long embezzlement of $14 million involving four senior managers.

The settlement covers several alleged violations, including illegal diversion of funds from customer accounts, checks from customers and vendors, and opening of fictitious customer accounts for the funds. Books and records were falsified, affecting the firm's reported financial results, according to the Securities and Exchange Commission.

``This was a very complicated scheme that was well concealed,'' said Thomas Newkirk, the SEC's associate enforcement director. ``When you have the head of internal audit and head cashier working away on it, it's hard to detect.''

The firm took for itself the unclaimed customer funds, uncashed checks and certain dividend payments owed to customers or others, the SEC said.

The scope of the settlement, which includes new independent overseers to distribute funds to customers and investigate Gruntal's trading on Nasdaq, makes it one of the larger enforcement cases on Wall Street. The New York-based Gruntal is one of the nation's biggest retail brokerage firms, with 840 brokers and $2.4 billion in assets.

According to court records, the scheme unraveled when Gruntal's former head cashier, Waseem Ahmad, died in October 1994. Gruntal launched an internal investigation and informed the SEC, the U.S. Attorney's Office, the National Association of Securities Dealers Inc. and the New York Stock Exchange.

The regulators and the criminal prosecutor all announced separate cases Tuesday. Gruntal agreed to settle by paying $6.2 million in fines and another $5.5 million in restitution to affected customers. In addition, another $7 million has either been paid out or credited to customers accounts as a result of Gruntal's internal investigation, said Gruntal spokesman Randy Bradley.

The firm didn't admit or deny wrongdoing.

``We are determined that these problems, which were the result of the actions of a small number of former employees, will not recur,'' said Robert P. Rittereiser, who was brought in as president and chief executive after the investigations began.

In New York, U.S. Attorney May Jo White said Gruntal's former second-in-command, Edward Bao, was named in a 17-count criminal indictment that alleged illegal diversion of unclaimed money and property belonging to Gruntal's customers. The money was diverted to benefit Gruntal, she said.

Bao is the third former Gruntal executive to face criminal charges.

Last August, Charles Meizoso, Gruntal's former operations director, and Eugene McCloskey, former manager of Gruntal's audit department, pled guilty to two criminal conspiracy counts. They face a maximum 10 years in prison for both of the counts as well as financial penalties.

Also, the NYSE barred Bao, Meizoso and McCloskey for failing to cooperate with its investigation, a move that effectively bars them from the securities industry. Regulators at other exchanges generally honor a NYSE suspension.

Newkirk said Gruntal could possibly pay additional money to investors, depending on the outcome of a separate SEC-ordered investigation of its dealings on the Nasdaq Stock Market and in over-the-counter stocks.

Bao's attorney, Steven Reiss of New York, said the charges concern technical regulatory matters.

``To my knowledge, there is no allegation that Mr. Bao took a penny of it for himself,'' Reiss said, adding that his client intends to fight the charges. In the criminal matter, Bao faces a maximum five years in prison, as well as financial penalties.

The SEC civil case, filed in U.S. District Court in New York, seeks to bar Bao as an officer or director of any public company.