The Post--news: "Mob's Wall Street Presence 'Significant'"
washingtonpost.com
Excellent job, Sandy. Thanks much ;-).
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>>> Mob's Wall Street Presence 'Significant'
By Sandra Sugawara
Washington Post Staff Writer
Thursday , September 14, 2000 ; E01
Organized crime's presence on Wall Street is growing and there are increasing signs that foreign mobsters are trying to penetrate U.S. stock markets, a top FBI official told a House hearing yesterday.
Thomas V. Fuentes, senior chief of the FBI's organized-crime section, said organized crime's involvement in the financial and securities markets "has become significant," although it has mainly been limited to low-priced, thinly traded stocks that are not listed on major stock exchanges.
But he said the FBI is seeing a number of cases that involve organized-crime groups from Eastern Europe and Russia that are trying to raise money on major stock markets. Fuentes said after the hearing that the FBI and the Securities and Exchange Commission are working on some international cases that are complicated by conflicting laws and national jurisdictions.
The suspected mob companies generally have manufacturing facilities in a number of different countries, making it difficult to check their financial statements. They often can get accounting firms to give them "a clean financial bill of health," Fuentes said.
"But we have inside information those books are fraudulent. In some cases, we have reports that the audit teams are being bribed in the millions or that they are being threatened overseas not to do due diligence."
In addition, some countries don't have money-laundering statues, and in others police are prevented from using undercover operations or wiretaps, which Fuentes insisted are critical in these cases.
So far, Asian organized-crime groups have shown little interest in the securities business, Fuentes said. "For whatever reason, the Russians and Eastern Europeans are the ones who are doing it. They were already heavily involved in major financial schemes to defraud their state back home. So they decided to apply those same techniques globally, I guess," he said.
Few of the American crime families have tried to infiltrate securities markets overseas, he added. "This is a generational thing. The younger members of these groups are more Internet knowledgeable. They are going to recognize the global opportunities. Right now the bosses of the crime families don't," Fuentes added.
Rep. Michael G. Oxley (R-Ohio), chairman of the House Commerce subcommittee on finance and hazardous materials, said the mob push is no surprise. "I know from my own experience as a special agent in the FBI that the mob will go where a dollar is being made," he said. "Today that's Wall Street, so it's really not surprising that organized crime is trying to suck some of the life out of the blossoming securities market."
Bradley W. Skolnik, president of the North American Securities Administrators Association, testified that the infiltration of criminal organizations into Wall Street has made it harder for securities regulators to do their jobs.
"Traditional weapons to sanction firms and brokers who violate market regulations--such as administrative fines and suspensions--have little effect on these criminals," said Skolnik, whose group represents state securities administrators. The only deterrents are criminal charges and prison, he added.
Richard H. Walker, the SEC's director of enforcement, said one reason the mob began focusing more on the securities market is that it was "driven from certain of its traditional havens, such as garbage-hauling cartels." But he said aggressive enforcement actions have closed some of the most notorious "boiler rooms"--operations that organized crime uses for fraudulently selling micro-cap stocks.
In one example in June, 120 defendants, including 11 members and associates of New York's five major organized-crime families, were charged with crimes relating to the manipulation of the securities market.
In another case, two associates of the Colombo organized-crime family were among 23 defendants charged with taking part in a stock-fraud and money-laundering scheme that defrauded hundreds of investors and generated illegal proceeds of $10 million with high-pressure sales tactics. One was sentenced last week to eight years in prison and a $10 million fine; the other was sentenced to five years and a $5 million fine.
In January, Gordon Hall, the chief executive of HealthTech International, was convicted on charges that he hired stock promoters, some of whom had ties to organized crime, to bribe brokers to pump up his company's stock price.
At the trial, a defendant testified that three brokers were hired to promote HealthTech, which then jumped 53 percent in a single day. One woman who lived in a nursing home lost more than $100,000 when brokers made unauthorized trades in her account.
Some wiretaps from the HealthTech case, in which Hall and mob associates discussed how HealthTech's stock price would be artificially pumped up, were played at the hearings yesterday.
"Um, you know, I know the stock is up for one reason, and that's you guys. There's no question about it," Hall said to one mobster.
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