I was thinking of an appropriate thread for this one
-- Broker charged with swindling Gambino crime member --
By Gail Appleson, Law Correspondent
NEW YORK, May 13 (Reuters) - The owner of a defunct Wall
Street brokerage firm, who has been sued by members of the
Gambino crime family for allegedly swindling them out of their
investments, was charged on Thursday by state and federal
authorities.
New York Attorney General Eliot Spitzer said a state grand
jury indictment was unsealed against Mohammad Ali Khan, 33, who
operated Klein Maus and Shire (KMS), charging him with
defrauding five clients including Thomas Gambino, son of
legendary Mafia leader Carlo Gambino. The five clients were
allegedly defrauded out of more than $1.2 million.
Spitzer said an arrest warrant was issued for Khan on April
23 but he remained a fugitive. Khan, who lives in Jersey City,
N.J., and is described in court papers as Pakistani, had owned
KMS until February.
In the federal case, prosecutors announced the unsealing of
a complaint charging Khan with securities fraud related to the
fraudulent "private placement" of $2.7 million of KMS stock to
55 investors. The complaint was filed under seal on April 29 in
Manhattan federal court.
A private placement refers to a limited sale of securities
to certain investors who meet specified requirements for net
worth and income. In this case, Khan allegedly made numerous
false statements to induce the 55 investors to purchase KMS
shares in the private placement between April 1996 and June
1997.
Court papers made public do not name the investors, and
prosecutors could not be reached to say whether the Gambinos
might have been cheated in the federal case.
The state and federal actions followed a lawsuit filed in
New York state court earlier this month by the Gambino family
against KMS alleging that family members' money was moved from
investment-grade bonds into speculative stocks in dozens of
unauthorized trades.
The suit seeks $2 million in damages on behalf of Thomas
Gambino and his brother, Joseph, their wives, Thomas Gambino's
son and daughter-in-law.
Thomas and Joseph Gambino pleaded guilty in 1992 to state
charges that they controlled the New York City garment
industry. They paid a $12 million fine and agreed to get out of
the apparel transporting business. Thomas Gambino began serving
a five-year prison term in 1996 after being convicted of
federal racketeering charges.
Khan is charged in the state case with using an elaborate
scheme to artificially inflate the price of a number of
securities by buying up shares and then selling them to his
clients without their authorization.
After making the trades, Khan wired the ill-gotten gains to
an account in Dubai, Spitzer said. But when the New York
Attorney General's Office learned of the transactions, it was
able to reverse the wire to Dubai with the help of the
clearinghouse S.G. Cowen & Co. Since the trades were not
authorized, the funds were returned to the clients' accounts.
REUTERS
Source RTR - Reuters News Service
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