Some more info on securities fraud case
Below is some expanded info from WSJ:
NEW YORK -- Federal prosecutors on Wednesday charged 120 people in a massive securities-fraud case in which they said organized crime families used threats, extortion and even solicitation of murder to infiltrate several small brokerage firms.
Indictments unsealed in federal court in New York charged the defendants with using traditional "boiler-room" tactics as well as the Internet to make more than $50 million in illegal profits over a five-year period from various securities-fraud schemes.
The case is believed to be the biggest racketeering and securities fraud crackdown on Wall Street. Among those charged were members of all five New York City organized crime families, a former New York City police detective, stockbrokers, promoters, and company executives and insiders. Ninety-eight had been arrested by Wednesday afternoon, authorities said.
Barry W. Mawn, FBI assistant director in charge of the New York office, said the investigation had "uncovered once again La Cosa Nostra's efforts to infiltrate the securities markets." He added: "No matter what market the mob tries to infiltrate, from the fish market to the stock market, the methods it uses are always the same: violence and the threat of violence."
The indictments are the latest in a series of cases in which authorities are targeting organized-crime influence at small brokerages and in the market for small securities. At least 18 people have pleaded guilty or been convicted in the most-publicized such case, a mob-related scheme to manipulate the stock of Healthtech International Inc.
In recent years, members of organized crime families have surfaced more frequently in securities fraud investigations. Authorities have said mobsters have tried to infiltrate Wall Street because they have been forced out of many of their more traditional rackets and because dramatic rises in the value of stocks has convinced them there is easy money to be made.
In the latest case, authorities detailed a scheme in which reputed mob figures gained control over a number of brokerages and employed tactics such as threats, extortion, bribery and even solicitation of murder to further the fraud. Prosecutors said they obtained some of their evidence by bugging one firm, DMN Capital, which couldn't immediately be located.
As part of the scheme, members and associates of the Bonanno and Colombo crime families allegedly forged alliances with the remaining three New York crime families. Among other things, the defendants sought to defraud union pension plans, prosecutors alleged. In some cases, they allegedly used traditional "boiler-room" tactics and the Internet to defraud unsuspecting investors. Some stocks were falsely touted as Internet stocks to induce investors to capitalize on the Internet boom, prosecutors said.
Among the defendants were 10 organized-crime members and associates tied to five crime families, including the Bonanno and Colombo families; Also charged were a former New York police detective, 12 promoters, 57 licensed and unlicensed brokers and 30 officers, directors and insiders of companies. U.S. Attorney Mary Jo White said never before have so many people been charged at once in such a case.
Search warrants were executed at four locations in New York, one in Dallas and one in Salt Lake City, Utah.
The defendants charged with racketeering allegedly controlled crews of brokers at various firms including First Liberty Investment Group Inc., William Scott & Co. and Bryn Mawr Investment Group.
The criminal enterprise allegedly tried to manipulate stocks of 19 publicly traded companies and to defraud investors in connection with the private placement of securities of 16 other companies, including one by Ranch* 1 Inc., which operates fast-food restaurants in New York City and elsewhere.
Among the defendants are Sebastian Rametta and James F. Chickara, officers of the Ranch*1 fast-food chain, who are alleged to be members of the Colombo crime family. One of the alleged frauds that authorities say cheated investors involved a private placement of securities by Ranch*1.
Also charged was Gene Phillips of Basic Capital Management, the investment adviser to American Realty Trust, and William P. Stephens, the chief investment strategist of Husic Capital Management, a San Francisco investment adviser. Authorities say Mr. Stephens agreed to manage up to $300 million in union pension funds knowing a portion would be used to fund kickbacks to other defendants as well as corrupt union officials.
Richard Walker, director of enforcement of the U.S. Securities and Exchange Commission, called the crimes "among the most egregious witnessed in recent years."
Along with criminal charges ranging from extortion, money laundering and murder solicitation, the SEC filed related civil suits against 63 individuals and companies alleged to have run schemes to "pump and dump" stock in small, microcap companies.
In connection with the crackdown, the SEC suspended trading in two securities, WAMEX Holdings Inc. and E-Pawn.com Inc., citing concerns about a lack of accurate public information about the companies. Both are traded on the OTC Bulletin Board.
Nine microcap stocks were named in the SEC's suits, including Spaceplex Amusements Centers International Ltd., Reclaim Inc., Beachport Entertainment Group Inc. and International Nursing Services Inc.
In 1995-96, the SEC alleged that 32 individuals took part in a scheme to inflate the price of those stocks, bribing brokers to recommend them to investors and generating at least $8 million on illegal profits.
The SEC also alleged that beginning in 1999, Allen Wolfson fraudulently inflated stock prices of BeautyMerchant.com -- formerly known as ATR Industries Inc. -- Learner's World Inc., Rollerball International Inc., Healthwatch Inc. and HYTK Industries Inc.
Six brokers were also charged for their alleged roles in helping Mr. Wolfson with the alleged scheme to manipulate those stocks. The manipulation generated at least $7 million in illicit profits, according to the SEC.
Additionally, the SEC charged 14 individuals and nine firms with conducting fraudulent private placements that raised about $3.5 million chiefly from cold-calls by unregistered brokers working in high-pressure "boiler rooms." More than 300 investors succumbed to the sales tactics, the SEC alleged. |
