Note that in yesterday's SEC sweep, Cary Cimino was the guy who allegedly plotted to contract for a murder...
usatoday.com
06/14/00- Updated 11:04 PM ET
FBI swoops down on Wall Street Mob
By Noelle Knox, USA TODAY
NEW YORK - At 6 a.m. Wednesday morning, New York's five controlling Mob families got a wake-up call, authorities say.
More than 600 FBI agents started arresting 120 suspects across the country, including 11 people connected to the organized crime families, in the largest securities fraud takedown in history, authorities said. They say the 10-month undercover operation, code-named Uptick, is the biggest dent they have put on the spread of the Mob on Wall Street.
Since law enforcement has cracked down on more traditional Mob activities, organized crime has increasingly found new opportunities on Wall Street, said Barry Mawn, assistant director of the FBI in New York. Since at least 1995, the Bonanno, Colombo, Gambino, Genovese and Luchese families have been infiltrating the stock market, bringing an element of violence rarely seen in the world of white-collar crime, authorities say.
The extent of the Mob's alleged reach became clear in indictments unsealed Wednesday. The charges include threats, extortion, physical intimidation and solicitation to commit murder.
"From the fish market to the stock market, the methods (the Mob) uses are always the same: violence and the threat of violence," Mawn said.
Authorities say they have known the Mob was migrating into "micro-cap stocks," buying shares in small companies and then bribing corrupt brokers to hawk the stocks to investors. After unsuspecting investors bought the stock, boosting the price, the Mob would sell.
Investigators say they got their big break when authorities arrested and turned an associate of the Bonanno crime family. He is known in court records only as CW-1, short for cooperating witness No. 1.
CW-1 worked at a company called DMN Capital Investments under the supervision of Robert "Little Robert" A. Lino, an alleged captain in the Bonanno family.
DMN Capital "was truly an investment bank for the crooked and the corrupt," said Mary Jo White, the U.S. Attorney for the Southern District of New York. "DMN was fraud central."
But CW-1 agreed to plead guilty to an undisclosed felony charge and cooperate with the U.S. Attorney's office by opening the door to DMN Capital's activities, which allegedly defrauded investors of at least $25 million, according to court documents. Other alleged scams included in Wednesday's sting cost investors another $25 million.
"At the direction of the FBI, CW-1 has continued to pose as a corrupt principal of DMN Capital," court papers say. "CW-1 has participated in negotiations with numerous persons who have sought his assistance in engaging in a wide variety of securities fraud schemes."
CW-1's identity, however, may be known to the Mob. At one point, Cary F. Cimino, a New York-based stock promoter, tried to contract a murder "of a person he believed to be a cooperating witness," court documents said. It was unclear if Cimino had taken out the contract on CW-1.
Nevertheless, with information from the informant, the FBI was able to get permission to wiretap DMN Capital's offices on Dec. 1, 1999. It recorded 1,000 hours of conversations over five months.
From those conversations, federal agents say they gathered enough evidence to arrest 120 suspects, including 57 stockbrokers, 12 stock promoters, 30 officers and directors of companies issuing securities, two accountants, a lawyer, an investment adviser and a hedge-fund manager.
A cop on the wrong side?
Stephen E. Gardell, a now-retired detective with the New York City Police Department, was leaking information to the Mob about the investigation into organized crime, investigators say. Gardell also helped members of organized crime get permits to carry firearms and special law enforcement parking permits.
Gardell also was the treasurer of the Detectives' Endowment Association, the retirement fund for New York City Police Department detectives. Authorities say Gardell agreed to defraud the pension plan but was arrested before the plan could be put into effect.
For his trouble, authorities say the Mob gave Gardell $8,000 for a swimming pool in his back yard, free stays at casinos in Las Vegas and Atlantic City, N.J., and a fur coat.
He could not be reached for comment.
The Mob had a similar plan to defraud the pension funds for the Production Workers Local 400 and the International Union of Operating Engineers Local 137, authorities said. Frank "Frankie" A. Persico is an alleged associate of the Colombo crime family and treasurer for the Production Workers' pension fund.
Authorities said Persico was arrested Wednesday.
Also indicted was William M. Stephens, chief investment officer of Husic Capital Management, a San Francisco-based investment adviser. Stephens allegedly agreed to manage up to $300 million in union pension funds, knowing that a portion would be invested in corrupt deals for the purpose of funding kickbacks to members of the Mob's crew, authorities said.
While the pension funds didn't lose money, thousands of other investors were not so lucky.
The Mob infiltrated or controlled several brokerage firms, spending $5 million in bribes to brokers, authorities said. They conspired with companies issuing securities and used boiler-room tactics to "pump and dump" the stock of 19 companies, authorities said.
Investigators say the Mob families also helped an additional 16 companies sell stock directly to investors in what is known as a "private placement."
One of those companies was Ranch #1 Group , a chain of grilled-chicken fast-food restaurants. Authorities on Wednesday arrested Sebastian Rametta, president and chief executive officer of Ranch #1, and James F. Chickara, vice chairman, claiming the men also were associates of the Colombo crime family.
According to Patrick Smith, an assistant U.S. attorney, Ranch #1 never sold the stock, but merely planned to. A call to Ranch #1 was not returned.
Playing the Internet craze
Still, other Mob scams zeroed in on investors' infatuation with dot-com stocks, authorities say.
They say one of those companies was Wamex Holdings, a Brooklyn, N.Y.-based company that allegedly was developing an alternative online trading system for individual investors.
Early Wednesday morning, the company put a preview of its national ad campaign on its Web site, promising to introduce the trading system July 4.
Hours later, the Securities and Exchange Commission halted trading on Wamex, claiming the company was a sham that had never sought regulatory approval for its trading system.
"The company never engaged in any illegal activity and it has no relationship with the mob," Sascha Mundstein, Wamex chief operating officer, told Reuters.
The SEC also stopped trading of shares of E-Pawn.com, a Florida-based company that describes itself as a multifaceted portal. The company's Web site, which has message boards and personal ads, said it would soon be offering German and French castles for sale - and already offers time shares at race tracks.
Authorities charged Leslie Greyling, an alleged principal of E-Pawn; Eli Liebowitz, president and chief financial officer; and Tina Alexander, a Texas stock promoter. E-Pawn executives couldn't be reached for comment.
KJC |
