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Stratton Oakmont Execs Plead Guilty to Fraud Charges
New York, Sept. 23 (Bloomberg) -- The former chairman and president of Stratton Oakmont Inc., a defunct brokerage firm, have pleaded guilty to an expanded series of stock-fraud charges, federal prosecutors said.
Former Chairman Jordan Belfort, 37, and Daniel Porush, 42, who was president of the firm, were charged last September by the U.S. Attorney in Brooklyn with 27 counts including securities fraud, money laundering and obstruction of justice, in a scheme that lasted from 1990 to 1997. Belfort pleaded guilty in May and Porush, in December, to two counts each of conspiracy to commit stock fraud and money laundering.
The pleadings unsealed today indicate that the fraud at Stratton was greater than previously disclosed. Belfort and Porush each pleaded guilty to eight new criminal counts, including manipulating the prices of at least 34 initial public offerings Stratton underwrote and money laundering now believed to total at least $80 million. Porush also pleaded guilty to charges of conspiring to trade on inside information involving a proposed merger between ITT Corp. and Caesars World Inc. while at Stratton, and to perjury, prosecutors said.
''These guilty pleas represent the successful prosecutions of the two principal owners of perhaps the most infamous boiler room brokerage in recent history,'' said Loretta Lynch, U.S. Attorney in Brooklyn, New York.
Belfort and Porush face a maximum of 20 years in prison, plus millions in fines and restitution for the hundreds of millions of dollars Stratton investors lost, said Joel Cohen, assistant U.S. Attorney in Brooklyn, who prosecuted the case. The men have already forfeited property worth at least $16 million.
No date has been set for sentencing, because Belfort and Porush may have to testify in other cases, Cohen said. The men will be sentenced by U.S. District Judge John Gleeson in Brooklyn.
''Dan (Porush) takes a step to put all this behind him, and today is the first day of the rest of his life,'' said Charles Stillman, Porush's attorney. Belfort's attorney, Gregory O'Connell, declined to comment.
Stratton, based in Lake Success, New York, was expelled from the securities industry in December 1996 for a history of sales abuses. It is being liquidated under the supervision of a court-appointed trustee.
Among the crimes Belfort and Porush admitted to were manipulating shares of Dollar Time Group, a Fort Lauderdale, Florida-based discount retailer, and Acquanatural Co., a distributor of water purification equipment.
Stratton stockbrokers allegedly pressured their customers to buy Dollar Time stock, at the request of Belfort and Porush, as the executives were selling their own shares in the companies.
The men smuggled millions of dollars to foreign companies they controlled to illegally buy the stocks, then resold them in violation of a Securities and Exchange Commission exemption for foreign sales of U.S. securities.
Dollar Time filed for Chapter 11 bankruptcy protection in 1995. Its ex-chief financial officer, Gary Kaminsky, was indicted for money laundering in 1994.
Other company IPOs Belfort and Porush are accused of manipulating include: Steven Madden Ltd., Select Media Communications Inc., The Solomon-Page Group Ltd. and United Leisure Corp., Ventura Entertainment Corp., Nova Capital Inc., IPS Healthcare Inc., DVI Financial Corp., Ventura Motion Picture Corp., Ropak Laboratories, Licon International Inc., Healthcare Imaging Services Inc., Repossession Auction Inc., Nutrition Management Services Co., SMT Health Services Inc., Judicate Inc., PDK Labs, Out-Takes Inc., Computer Marketplace, Master Galzier's Karate International Inc., Octagon Inc., M.H. Meyerson & Co., IDM Environmental Corp., Childrobics Inc., Select Media Communications Inc., Dualstar Technologies Corp., Czech Industries Inc., CSI Computer Specialists Inc., MVSI Inc., Hemisphere BioPharma Inc., Paramount Financial Corp., International Dispensing Corp., e-Net Inc. and n-Vision Inc.,
Belfort separately admitted to two counts for his role in manipulating the IPOs of Big City Bagels Inc. and Pallett Management Systems Inc. after he left Stratton Oakmont.
Porush pleaded guilty to one count of conspiring to commit insider trading and one count of perjury in U.S. District Court in Manhattan, but that case has been transferred to Brooklyn and he'll be sentenced there on those counts, Cohen, the Brooklyn prosecutor, said.
In that case, Porush admitted he received non-public information before ITT announced its acquisition of Caesars World, prosecutors said. He used that information, which originated from a Bankers Trust Corp. employee, to buy options for Caesars World stock, then sold them for a profit of about $150,000, they said.
He also lied to the Securities and Exchange Commission about where he got the information, prosecutors said.
Sep/23/1999 16:27
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