Mob, Brokers in `Largest Securities Fraud,' U.S. Says Mob, Brokers in `Largest Securities Fraud,' U.S. Says New York, June 14 (Bloomberg) -- Reputed mobsters with ties to New York's five organized crime families have been accused of using threats, intimidation and severe beatings of brokers to orchestrate a broad stock swindle that cheated investors out of $50 million.
In what federal prosecutors are calling ``the largest
securities fraud takedown in history,'' 120 defendants have been
charged with manipulating stocks, bribing brokers, running
securities scams over the Internet, and raiding pension funds,
including one that serves New York City police detectives.
The defendants were charged in 16 indictments and seven
criminal complaints unsealed today in U.S. District Court in
Manhattan. Prosecutors said the cases involve fraud in connection
with 19 public companies and the private placement of securities
in 16 others, including Ranch*1 Inc., which operates fast-food
chicken outlets around New York.
``Their tentacles of fraud reached into every corner of the
public and private securities markets, and they preyed on their
victims using both traditional boiler-room tactics and
contemporary Internet-based manipulations,'' U.S. Attorney Mary Jo
White said.
The conspiracy cost investors roughly $50 million,
prosecutors said. White said the cases represented the largest
number of defendants ever arrested at one time on securities fraud
charges. Civil charges have also been filed by the U.S. Securities
and Exchange Commission.
In addition to the alleged mobsters, prosecutors have charged
stock promoters, brokers, officers of several companies, a New
York City police detective, and a ``major West Coast investment
adviser,'' identified by authorities as William P. Stephens, chief
investment strategist for Husic Capital Management in San
Francisco.
The defendants were ``allegedly involved in a series of
nationwide, multimillion-dollar securities schemes marked by
racketeering, bribery, extortion, solicitation of murder, and
other crimes,'' prosecutors said in a statement.
Mob Infiltration
The indictments claim that mobsters from the Bonanno and
Colombo crime families, ``perpetrated massive securities fraud''
from 1995 to 1999 by forging alliances with New York's three other
crime families.
The mobsters are alleged to have infiltrated broker-dealers,
conspired with stock brokers, and schemed to defraud union pension
plans. Prosecutors say they secretly controlled various New York
City-area brokerages, including Monitor Investment Group Inc.,
First Liberty Investment Group Inc., William Scott & Co., Atlantic
General Financial Group, and the defunct Meyers Pollock and
Robbins.
The alleged conspirators used any number of schemes to make
money, prosecutors said. In violation of SEC rules, for instance,
they secretly obtained large blocks of securities in various
stocks, including Beachport Entertainment Corp., Reclaim Inc.,
Accessible Software Inc., and International Nursing Services Inc.,
prosecutors said.
Then, through brokerages they secretly controlled, they paid
bribes to corrupt brokers, engaged in rigged stock trades, and
used ``other boiler room tactics'' to drive up share price,
prosecutors said. The defendants then sold their shares.
``In order to enforce discipline among the brokers allegedly
involved in these schemes, and to punish those who reneged on
their agreements to sell stock in return for bribes, (the
mobsters) subjected brokers to beatings, intimidation and
threats,'' prosecutors said in a statement.
Pension Funds
One stock promoter, Cary Cimino, is alleged to have solicited
the murder of a person he believed to be cooperating with
prosecutors.
Also, the defendants are accused of conspiring with corrupt
pension fund managers to gain control of union pension funds. The
alleged schemers would then structure investments for those funds
in a way that would allow them to divert a portion of the
investments back to the defendants, prosecutors said.
And from October 1999 through June, the defendants sought to
defraud private placement investors by arranging to pay secret --
and often exorbitant -- commissions to brokers, prosecutors said.
Among these private placements were Ranch*1 and World Gourmet
Soups Inc., prosecutors said.
Ranch*1 announced plans last year to go public but withdrew
its application for a stock offering on March 23.
--David Glovin in U.S. District Court in New York (212) 732-9245,
or at dglovin@bloomberg.net, through the New York newsroom (212)
893-3665 /jhr/ep |
