LOCK<--and the MOb....!!
BN Mob Families Were `Muscle' for Stock Fraud, U.S. Says (Correct)
Mar 2 2000 14:31
Mob Families Were `Muscle' for Stock Fraud, U.S. Says (Correct)
(Corrects to say NASD filed administrative charges.)
Brooklyn, New York, March 2 (Bloomberg) -- Three New York
Mafia families provided the ``muscle' for a penny stock scheme
that defrauded investors of up to $60 million, federal prosecutors
charged today.
Authorities say owners and employees of two Manhattan
brokerages, White Rock Partners & Co. and State Street Capital
Markets Corp., ran a three-year scheme that artificially boosted
the share price of four small companies, including Bala Cynwyd,
Pennsylvania-based Country World Casinos Inc.
Prosecutors said members of the Bonanno, Genovese, and
Colombo organized crime families stopped an extortion attempt
aimed at one of the brokerages.
The case ``could be entitled `Goodfellas' meets `Boiler
Room,' ' New York City Police Commissioner Howard Safir said at a
press conference today, referring to Martin Scorsese's 1990 film
on mob life and a current movie that depicts a corrupt stock
brokerage. ``The defendants availed themselves of the muscle offered by
the Cosa Nostra,' U.S. Attorney Loretta Lynch said.
Authorities said the case underscores how organized crime,
pushed out of traditional industries such as carting and
construction, is moving into more lucrative businesses.
Follow the Money
``The mob goes where the money is,' Lewis Schiliro,
assistant director in charge of the Federal Bureau of
Investigation in New York, said. The scheme was ``such a cash cow
that the Cosa Nostra people made $100,000 in one day,' he said.
In a related action, NASD Regulation Inc., the regulatory arm
of the National Association of Securities Dealers, filed
administrative charges against 11 former brokers of now-defunct
State Street Capital, including several who are charged in the
criminal case.
The brokers are alleged to have engaged in trades without
customer approval and failed to execute customer orders.
In the criminal case, federal authorities said they believe
unidentified Russian organized crime figures helped participants
in the scheme launder their ill-gotten gains through overseas
accounts.
In all, 19 defendants were charged in the case, including 10
brokers, the nephew of imprisoned former Colombo family boss
Carmine Persico, and a brother-in-law of mob informant Salvatore
``Sammy the Bull' Gravano, whose testimony against his former
boss John Gotti, sent the leader of the Gambino crime family to
prison. Gravano was arrested last month on charges he financed an
Arizona drug ring operated by a white supremacist gang.
The defendants in the stock scheme face up to 20 years in
prison.
Prosecutors said the defendants inflated the share prices of
three companies in addition to Country World Casinos, which was
purportedly seeking to develop a casino in Black Hawk, Colorado.
The other firms were Moorestown, New Jersey-based Holly
Products Inc., New York-based Cable & Co. Worldwide Inc., and U.S.
Bridge of New York Inc.
Secret Control
According to prosecutors, defendants John Doukas, Walter
Durchalter, and three unindicted coconspirators used White Rock
and State Street Partners to secretly acquire stock in the four
companies.
Brokers with the two firms and other brokerages, including J.W. Barclay & Co. Inc. and D.H. Blair & Co. Inc., then
artificially inflated share prices by deceiving investors,
prosecutors said.
For three years, the defendants sold their shares at inflated
prices and relied on another defendant, Aleks Paul, to launder the
money through several off-shore accounts, authorities said.
According to prosecutors, mobsters, including a captain in
the Bonanno crime family, intervened when the president of U.S.
Bridge, himself an alleged Gambino member, tried to extort the
brokerage houses.
When brokers tried to leave White Rock or State Street,
mobsters demanded payoffs from the businesses that sought to hire
them, prosecutors allege.
Authorities say the mob enforcers were paid off in cash and
securities.
--David Glovin in U.S. District Court in New York (212) 732-9245
through the New York newsroom (212) 893-3665/ep
Story illustration: for a graph of Country World Casinos recent
stock performance: CWRC US <Equity> GPO <Go>. |
