Re: 4/6/03 - NY Times: A View of Wall St. From Its Shady Side
A View of Wall St. From Its Shady Side
By EDWARD WYATT
When Business Week reported in late 1996 that the Mafia had infiltrated Wall Street, most of the financial world took a hard look at the seemingly stunning revelation — and yawned.
The Wall Street that the magazine was talking about, it turned out, was not that of the white-shoe investment bankers and pinstriped stock brokers. Nor was the mob that had perpetrated those wrongs that of the Dapper Don or any other capo di tutti capi who was a well-known darling of the tabloids.
Rather, in "The Mob on Wall Street" and a series of similar articles over the next year, the magazine presented a well-documented case that the smallest, least-watched segment of the market — the so-called microcap stocks that trade on the Nasdaq SmallCap Market, the OTC Bulletin Board or in the pink sheets — was being manipulated by bucket-shop firms operated by unlicensed brokers and managed by loosely organized gangs of thugs, some of them with crime-family connections.
It was not an inconsequential revelation. Still, it did not live up to its billing as a serious breach in the bulwark of capitalism. The market for small-cap stocks has long been the darkest corner of Wall Street, and federal prosecutors have been indicting men with Mafia connections, accusing them of stock fraud, since at least 1970.
The Business Week articles, however, provided a much-needed public service. As the bull market raged, they sought to remind investors that the unknown broker from the unfamiliar firm who calls during dinner to offer a can't-miss investment opportunity — one that must be grabbed right now! — might not have an investor's best interest in mind.
That enough people did not listen is made clear in "Born To Steal: When the Mafia Hit Wall Street," a riveting new book by Gary Weiss, a senior writer at Business Week who researched and wrote the "Mob on Wall Street" articles.
"Born to Steal," to be published next month by Warner Books, is everything the magazine articles were not: captivating, juicy and fast paced. Told through the eyes of Louis Pasciuto, one of those brokers who peddled worthless stocks, it is a chronicle of a mesmerizing sociopath who, while constantly on the verge of being torn limb from limb by the criminal element that is extorting money from him, still continues to muster the wherewithal to separate innocent people from their money, mostly over the phone.
Mr. Pasciuto, who pleaded guilty to three counts of securities fraud, has cooperated with federal prosecutors in cases brought against 22 of the 120 brokers and others who were arrested and charged with securities fraud in June 2000. In exchange, he was promised leniency and, possibly, a spot in the witness-protection program. He is awaiting sentencing.
Over all, his story brings to light the many failings of regulators who are charged with stopping such fraud. He is unlicensed, so he uses the name of a licensed colleague. He works his way through more than a dozen so-called chop houses, which, the author explains, "looked like brokerage houses, in much the same way as a sewer pipe superficially resembles a water pipe."
Watching Mr. Pasciuto's story unfold is like watching a train wreck. It is ghastly, yet it is impossible to turn away. He runs over with tragic flaws — juggling a stripper girlfriend with a virginal fiancée, going on weeklong cocaine binges and working over potential customers, challenging whether they are man enough to invest in stocks that Mr. Pasciuto has touted as sure winners. It is clear, however, that he is nothing if not resourceful. At one point, unable to keep an extortionist at bay, he simply asks a judge to revoke his bail and put him safely in prison.
To clear up any doubt that he is not a typical stockbroker selling stocks or mutual funds, Mr. Pasciuto explains the differences: "They were really investing clients' money to make the clients gain wealth. We weren't doing that. We were investing the clients' money so we could gain wealth."
The legitimate stockbrokers were making money, he says, "but they were making 2 percent a year off an account."
"If a guy had $10 million in an account, they're taking $200,000 every year," he adds. "If we had $10 million in an account, we were making like $2 million a month. Different story."
The money that Mr. Pasciuto is taking from customers leaves him with little but contempt for them. "Half these people, you could hear it in their voice," he is quoted as saying. "They're willing to send the money. They'd give signs." Not just a few thousand dollars, either. These are people who would send tens of thousands of dollars, hundreds of thousands, to someone they had never met. "I don't know if it's greed," he says. "I don't know what it is with these people. Why would you send somebody half a million dollars?"
Much of the book consists of the long, verbatim ramblings of Mr. Pasciuto. The book's biggest failing is that the reader is asked to believe the word of someone who's characterized as a liar, thief and thug.
Mr. Weiss tries to address that matter in an author's note. "Much of what he told me became grist for future indictments and was confirmed by reams of documentation, including the court records of various civil and criminal cases involving Louis's employers and associates. Crucial parts of his story — from the identities of obscure Mafioso to the intimate details of stock fraud — were independently verified by people well outside Louis's orbit."
AIR enough, but questions linger. Most notably, the central foil to Mr. Pasciuto is Charlie Ricottone, who "adopts" Mr. Pasciuto and begins demanding an ever-increasing share of his takings. Mr. Ricottone pleaded guilty to securities fraud charges in 2001 and was sentenced to four years in prison.
Mr. Ricottone apparently was considered too vile to get into the mob. It rejected him, leaving Mr. Pasciuto not so much a tool of the Mafia as a victim of what Mr. Pasciuto describes as a sort-of freelance goon.
Whatever that says about a book that pretends to offer a view of the Mafia on Wall Street, it is outweighed by the thrill of the narrative. It ventures into a area that most people on Wall Street knew existed in the danker corners of the investment world, but had rarely seen.
Copyright 2003 The New York Times Company
nytimes.com |
