and again
Ex-brokers admit fraud, pledge $16 mln compensation
By Gail Appleson, Law Correspondent
NEW YORK, Sept 23 (Reuters) - Two men who ran an infamous ''boiler-room'' brokerage firm have pleaded guilty to bilking thousands of investors in a variety of schemes, and will forfeit $16 million worth of property to partially compensate former clients, U.S. prosecutors said Thursday.
Jordan Belfort, former chairman, and Daniel Porush, former president and chief executive officer of Stratton Oakmont, pleaded guilty to charges of stock manipulation and money laundering, the prosecutors said.
Stratton Oakmont, based in Lake Success, N.Y., closed in December 1996. Prosecutors said thousands of investors succombed to high-pressure tactics the firm used to sell stocks that were vastly overpriced.
It was perhaps the most ''infamous boiler room brokerage firm in recent memory,'' said Loretta Lynch, U.S. Attorney in Brooklyn.
''Stratton Oakmont's notoriety arose both from the breadth of fraud committed during its almost decade of operation -- affecting thousands of innocent customers who lost hundreds of millions of dollars in at least 34 Stratton public offerings -- and from the brazen nature of the manipulative practices and schemes perpetrated there,'' she said.
Prosecutors said Belfort pleaded guilty on May 26 and Porush pleaded guilty late last year, but the pleas were just unsealed in Brooklyn federal court on Thursday.
They said the two also admitted to expanded charges including the manipulation of shares of at least 34 diferent companies for which Stratton Oakmont underwrote the initial public and secondary offerings. These schemes were carried out between 1990 and 1997, prosecutors said.
Belfort and Porush were indicted last year for running a money laundering scheme from 1993 through 1995. The scheme also involved manipulating the stocks of two companies, Dollar Time Group and Aquanatural Co. Both companies were underwritten by Sratton Oakmont.
In that scheme, prosecutors said, the two smuggled over $1.4 million in cash to Switzerland and England, depositing it into offshore bank accounts secretly controlled by them and others. They used the smuggled cash to buy millions of shares of the two companies. The shares were issued to their foreign nominees at below market prices.
The men later caused brokers at Stratton and other firms to lie to investors about the value of the two stocks, creating a market to sell there own secretly held shares at inflated prices. As part of their pleas they admitted they laundered about $5 million in illegal proceeds.
Separately, prosecutors in Manhattan on Thursday said a federal judge there also unsealed a guilty plea Porush entered in March to charges stemming from a different scheme. They said Porush pleaded guilty to insider trading connected with ITT Corp's 1994 tender offer for Caesars World, and lying during a related investigation by the Securities and Exchange Commission.
He had been charged in Manhattan federal court in August 1998 for his role in an insider trading scheme involving Alan Stricoff, a former Bankers Trust Corp. compliance vice president, and others. Stricoff, who pleaded guilty to stealing confidential information from his employer, was sentenced to 18 months in prison last year.
Stricoff had access to Bankers Trust's ''Gray List'' of companies that were involved in merger and acquisition activity. This list included ITT which had approached Bankers Trust to serve as financial advisor in its 1994 acquisition of Caesars World.
According to court papers, the inside information was passed to others including a friend of Porush who told the broker about ITT's imminent tender offer. Porush traded on the information and made a profit of about $150,000.
20:10 09-23-99 |
