Belfort Gets 4 Years in Stocks Scam
By Susan Harrigan
Staff Writer
July 18, 2003, 6:50 PM EDT
Jordan Belfort, co-mastermind of one of the most notorious small-stock manipulation schemes in history, was sentenced in Brooklyn Federal Court Friday to four years in prison.
U.S. federal Judge John Gleeson also ordered Belfort to pay about $110.4 million in restitution to victims of Stratton Oakmont, the Lake Success-based "boiler room" operation run by Belfort and his former partner, Daniel Porush. The money will be paid in installments amounting to 50 percent of Belfort's monthly gross income after his release, Gleeson said. "Mr. Belfort's going to earn a lot of money," he said. "I have no doubt."
Stratton Oakmont, founded in 1989 and closed by regulators in December, 1996, specialized in "pump and dump" schemes. Brokers using banks of telephones ran up the prices of small stocks with aggressive and fraudulent sales pitches. Insiders then sold out, causing prices to collapse and leaving thousands of investors holding nearly worthless shares.
Belfort and Porush pleaded guilty to money-laundering and securities fraud in May, 1999. Since then, Belfort has served as a cooperating witness, with his case handled by Daniel R. Alonso, chief of the criminal division in the Eastern District of New York, and David Pitofsky, deputy chief of that division. Belfort has helped win convictions in more than two dozen cases connected with Stratton's schemes, Gleeson said.
Porush lost his effectiveness as a witness in 2001, when officials in Florida charged him with unlicensed telemarketing. He pleaded guilty to two misdemeanors in that case, and received a 13-month sentence that runs concurrently with a four-year jail term he received from Gleeson in May, 2002.
At yesterday's hearing, Belfort, 41, said he regrets his former actions. "I just feel so bad about it," he said. "I've hurt a lot of people, including family. I knew exactly what I was doing -- I just couldn't stop. Now, I try to always do the right thing."
Gleeson said Belfort's cooperation "lopped many years off" the jail term he would otherwise have gotten, but that it must be balanced against "many years of brazen, arrogant fraud." In addition to hurting investors, Belfort "corrupted hundreds of young people" who worked at Stratton and took regulators "to the cleaners, basically" by failing to honor the terms of a 1994 settlement with the SEC, he said.
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