Getting ever so closer Isaac Winehouse: Feds/Stock Fraud : Cross Between Sopranos, Boiler Room
2001-03-08 12:58 (New York)
Can ISRC and WSEI be far behind?
By Colleen DeBaise
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Two reputed mob figures and 18 others have been charged
with cheating thousands of investors out of more than $50 million in a stock
fraud case that federal authorities likened to a cross between "The Sopranos"
and "Boiler Room."
The scheme, which involved the artificial inflation of at least five
small-cap securities, was run through three corrupt brokerages in the New York
City area, according to U.S. Attorney Loretta E. Lynch, who announced the
indictment in Brooklyn, N.Y., Thursday.
She said brokers at the firms used high-pressure or "boiler-room" sales
tactics to push stocks on customers, and verbally abused customers who resisted
advice to buy or hold the securities. In addition, some of the brokers
threatened bodily harm to those who were short-selling the stocks and causing
prices to drop, she said.
The scheme was run out of three now-defunct firms - First United Equities
Corp., which had offices in Garden City, N.Y., Manhattan and Woodbridge, N.J.;
Lexington Capital in Hauppauge, N.Y.; and AGS Financial Group, which had
offices in Manhattan and Chicago.
Among those charged are Hunter Adams, 33, and Michael Reiter, 31, who
authorities say are associates of the Gambino organized crime family. Other
defendants who allegedly played a large role in the fraud scheme include
Jonathan Winston, 35, Jason Cohen, 48, Gregg Adams, 26, and Robert Mangiarano,
27.
Eighteen defendants also face civil fraud charges filed by the Securities and
Exchange Commission.
The companies whose securities were allegedly manipulated include Ashton
Technology Group Inc. (ASTN), EquiMed Inc. (EQMDE), IRT Industries Inc., Mama
Tish's Italian Specialties Inc. and National Medical Financial Corp. (NMFS).
Authorities said the scheme centered around the activities of brokers at
First United, which underwrote initial public offerings of at least two of the
stocks involved. Principals of the firm would maintain control over large
blocks of the stocks while using a variety of misrepresentations to push the
securities on customers, according to the indictment.
In one instance, brokers drove the price of Ashton stock up to $15.25 a share
before allowing it to plunge to less than a dollar, authorities said. Similar
patterns were seen with some of the other stocks. In the end, thousands of
customers throughout the U.S. - some of them sophisticated investors - lost
tens of millions of dollars because of the fraud, according to Lynch, the
Brooklyn U.S. Attorney.
Lynch called the case "a striking example of the rigged investment
'opportunities' that are presented to the unsuspecting investing public by
'boiler room' operations."
New York State Attorney General Eliot Spitzer, who announced the charges with
Lynch at a Brooklyn press conference, said: "This is really a case of life
imitating art - it's a combination of 'The Sopranos' and 'Boiler Room.'
Unfortunately, this isn't the movies or TV.
The defendants, who were indicted on charges of securities fraud, mail fraud
and wire fraud, were scheduled to be arraigned later Thursday in Brooklyn
federal court, and couldn't immediately be reached for comment.
Winston, Cohen, Hunter Adams, Reiter, Gregg Adams and Mangiarano also were
charged with money laundering, which carries a sentence of up to 20 years in
prison and a fine of at least $250,000. The securities fraud charges carries a
maximum sentence of 10 years in prison and a fine of $1 million.
Barry Mawn, assistant director-in-charge of the FBI's New York office, said
it used agents in both its white-collar crime and organized-crime units to
investigate the case. The FBI said it has drawn upon both units before in
investigating so-called "Mob On Wall Street" cases, and plans to stick with
that approach to "insure that our financial markets do not become a cash cow
for the mob."
Other defendants charged in the case are: James Bila; Christian Blake; Steven
Cohen; Louis Facchini, Jr.; David Hirsch; Joseph Mannino; John Gremmo III;
David Margules; James Pellizzi; David Passo; Michael Pugliese; Chris Russo;
Howard Weinstein and Robert Winston. |
