Hanover Sterling's history is one of my most researched Boiler Rooms. Did the NASDQ and Bear Sterns look the other way and let the fraud continue for such a long time? The answer is yes. Is it a Bear Raid to short fraudulent manipulated stocks? My opinion is that it is not. Here is a story from Business Week that discribes Hanover Sterling and the NASDQ in a different light.
DID THE NASD LOOK THE OTHER WAY?
He was the head of a penny-stock brokerage that has had its share of regulatory problems. This, he has told friends, is what happened to him early in 1996:
Two men appeared at his midtown Manhattan office. They went for a walk. One man stuck a revolver in his ribs. ''From now on,'' he was told, ''you're retailing our stocks.''
According to sources, this man's brokerage did not retail the two mobsters' stocks. Nor did he contact regulators or the National Association of Securities Dealers. Instead, he got in touch with the only power that seemed to make sense: a protector in the Mob. Somehow, the problem was ''straightened out.'' Asked about the incident by BUSINESS WEEK, he responds: ''I don't want to get involved.''
If this penny-stock exec showed a less than civic-minded attitude toward law enforcement, it's understandable--particularly if the allegations of a 57-year-old former NASD official, Massood Gilani, prove valid. Gilani worked in the Special Investigations Unit of the NASD's New York office, checking complaints of improprieties and reporting them to his superiors for further action. He paints a picture of widespread indifference toward customer complaints that might have been a tip-off of Mob infiltration of Hanover Sterling & Co.
From 1992, when Gilani started working at the NASD in New York, until late 1995, when he left, there was disturbing talk in the hallways of the agency's New York office. ''The rumor was that some of these firms were run by the Mafia...the word was that some of them, including Hanover Sterling, were used to launder drug money,'' he says.
Gilani says he received an unusually large volume of complaints about Hanover from customers, most involving unauthorized trades--something Gilani suspected might have indicated stock ''parking.'' ''They were definitely pushing the stocks up, and it definitely looked like parking,'' says Gilani. From October, 1993, to June, 1994, he says in the suit, there were at least 31 customer complaints against Hanover, almost all alleging unauthorized trading. Among the complaints, he says, were several against Roy Ageloff, who Gilani says was widely known at the NASD to be the power behind the firm. Sources have told BUSINESS WEEK that Ageloff has ties to the Genovese crime family.
Gilani says he ''suggested that a wider investigation be conducted by enforcement and market surveillance.'' The response? ''I was told to mind my own business.'' At one point, he was told by a supervisor ''very bluntly that [the brokerages] pay your paycheck. You don't bite the hand that feeds you.''
NASD officials note that they took action against Hanover Sterling--but not until after Hanover went out of business. Gilani says that he urged the NASD to act long before the company folded--in time, perhaps, for regulators to act before its failure brought down the company's clearing firm, Adler, Coleman.
Gilani is hardly an impartial source: He was fired by NASD in 1995, and he's suing for racial discrimination. (NASD officials decline comment on the suit.) Still, his comments regarding the NASD's handling of Hanover Sterling are damning.
To be sure, Gilani hardly had much clout at the NASD, since he was in the doghouse much of the time. One lawyer pursuing his suit, Aegis J. Frumento of Singer Zamansky LLP in New York, notes that the Iranian-born Gilani ''agitated a great deal on discrimination and employment policies.'' Gilani feels he was ignored because of the ''corporate culture at the NASD.'' And if his tale of indifference proves correct, it would seem that the NASD is a far cry from being the Eliot Ness of Wall Street.
By Gary Weiss in New York
businessweek.com |
