Interesting reading for all of you GYMM rats!
Mob on Wall Street Case Goes to Trial in New York Next Week
New York, March 19 (Bloomberg) -- Federal officials hope to prove in court that organized crime -- with its traditional sources of revenue drying up -- turned to gullible stock market investors to replenish its coffers.
A stockbroker and a business executive go on trial in Manhattan next week in what federal prosecutors call organized crime's most aggressive attempt to infiltrate Wall Street. The conspirators pocketed more than $1.3 million in illegal profits in 1997 by manipulating the stock of HealthTech International Inc., a health-club chain, the government says.
Still, experts say the underworld does not pose a major threat to the investing public. ''Smaller companies that may not have access to conventional means of financing can become victims of predators,'' said attorney Jonathan Rosenberg, a former federal prosecutor in New York. ''That's not to suggest that Wall Street in general or that stockholders in general should have a concern about organized crime with respect to household name companies.''
Organized crime's influence over the securities industry is considered marginal and confined to a handful of penny stocks traded on the Nasdaq Small-Cap Market or the over-the-counter bulletin board, regulators say. Wall Street looked tempting as the mob's take waned from its control of the construction, garment, fish, produce and garbage-hauling industries in New York, officials say.
Cellular phone conversations are expected to play a central role in the New York case as the government seeks to prove the mob bribed crooked brokers to tout shares of HealthTech International and then sell the overpriced stock to unsuspecting investors.
Key Evidence
Facing fraud charges in the case are Gordon Hall, 45, chairman and majority stockholder of HealthTech, and Michael Motsykulashvili, 26, a former stockbroker at Meyers Pollock & Robbins in New York. Jury selection is set for Monday and the trial before U.S. District Judge Denny Chin expected to last about three months.
FBI wiretaps provided key evidence in the investigation of 20 people charged in the case. Frank Lombardo alone, an alleged associate of New York's Bonanno crime family, reportedly made up to 200 cell phone calls a day.
The government intercepted nearly 11,000 cell phone conversations during the 11-month undercover operation. Agents eavesdropped on phones used by Lombardo and two other people described by prosecutors as Bonanno family members, according to court records.
The Bonanno and Genovese crime families used extortion, bribes, threats and fraud to inflate the stock price of Mesa, Arizona-based HealthTech and other penny stocks, according to court records and lawyers involved in the case.
Since federal prosecutors announced the arrests in November 1997, 14 people, including Lombardo and four alleged mob members, have pleaded guilty to fraud and extortion. The cell phone taps could be crucial because Lombardo and the alleged mobsters aren't expected to testify at trial.
Crime Families
Prosecutors allege that members of New York's Genovese and Bonanno families used bribes and extortion to control Meyers Pollock brokerages in New Hyde Park, Long Island and Manhattan.
Hall, a Mesa resident, denies the stock manipulation charges, and says he knew nothing about alleged wrongdoing by two stock promoters he hired to push HealthTech to brokers. ''He had no knowledge that anybody he was dealing with was affiliated with organized crime,'' said his attorney, James McGuire.
Hall, who still runs HealthTech, held onto his company stock, undercutting the government's argument that he had an incentive to sell inflated shares. ''He is fully committed to the company,'' McGuire said.
Motsykulashvili of Hicksville, Long Island, also denies cheating investors, said his attorney, Barry Turner. ''He denies any guilt and is going to fight to prove his innocence,'' Turner said.
Inflated Price
Prosecutors allege that Hall hired two stock promoters: Lombardo, an associate of the Bonanno crime family, and Claudio Iodice, to run the HealthTech scheme. They were accused, along with Irwin Schneider, a disbarred securities lawyer, of conspiring with Meyers Pollock brokers to hype HealthTech stock and then profit from selling it to investors at an inflated price.
Schneider and Lombardo previously pleaded guilty to fraud charges and are awaiting sentencing.
If convicted of fraud, racketeering and conspiracy charges, Hall could face up to 20 years in prison. Motsykulashvili could face up to 10 years for the conspiracy and fraud counts against him.
FBI agents and officials of the Joint Organized Crime Task Force in New York tapped three cell phones used by Lombardo, court documents said. Agents also intercepted conversations from cell phones used by Rosario ''Rossi'' Gangi, an alleged high- ranking ''capo,'' or captain, in the Genovese family, and Ernest ''Green Eyes'' Montevecchi, an alleged Genovese ''soldier,'' the documents said.
Lawyers for Hall and Motsykulashvili say their clients are hardly mentioned in the calls and never in an incriminating context.
The wiretapped conversations also show that some targets of the eavesdropping had interests in illegal gambling and narcotics, prosecutors contend in court papers. One person is overheard discussing a planned trip to Nicaragua to buy shrimp, which prosecutors call a veiled reference to drug running. Prosecutors didn't charge the defendants with drug violations.
Abandoned Bugs
Court documents suggest FBI agents considered but abandoned plans to use a bug and video-monitoring equipment, a common law- enforcement tool in mob investigations not involving stock fraud. Federal agents in 1997 got a court order to use the equipment inside the conference room of Meyers Pollock in Manhattan and then dropped the idea after FBI agents were discovered late at night trying to install it, the documents said.
The U.S. attorney's office in New York and the FBI declined comment on the case.
Meanwhile, the trial of the other stock promoter Hall hired, Iodice, is on hold indefinitely. Iodice is accused of threatening Hall's family with a knife attack if Hall didn't pay additional bribes to the brokers and promoters. Iodice subsequently suffered an ''accidental ingestion'' of isopropyl alcohol and had his esophagus removed, according to a letter from his physician in Boca Raton, Florida.
Neither prosecutors nor Iodice's attorney, Roberto Stanziale, would discuss his injury.
Other defendants who have pleaded guilty include Gangi, Montevecchi, Frank ''Curly'' Lino, an alleged capo, and John ''Boobie'' Cerasani, an alleged soldier, in the Bonanno crime family. They are awaiting sentencing.
NYSE/AMEX delayed 20 min. NASDAQ delayed 15 min. |
