Federal authorities on Thursday charged 20
people with bilking investors out of $50 million in a stock fraud
scheme hatched by mob-infiltrated brokerage firms in Manhattan and
The firms mainly preyed on inexperienced investors. But two
victims who lost more than $1 million each were described as
middle-age businessmen. Two others were a National Football League
player and a professional tennis player.
Authorities wouldn't name any of the more than 1,000 victims
nationwide, but some of them "should have known better because
they're sophisticated," state Attorney General Eliot Spitzer said
at a new conference.
Two defendants, Hunter Adams and Michael Reiter, were identified
as associates in the Gambino organized crime family. An indictment
accused them of funneling illicit profits to their mob bosses from
First United Equities Corp., a now-defunct brokerage that had
offices in Manhattan, Garden City, N.Y., and Woodbridge, N.J.
Attorneys for the two men did not immediately return phone calls
Between 1994 and 1998, brokers at First United and two other
former boiler-room operations Lexington Capital, in Hauppauge,
N.Y., and AGS Financial Group, in Manhattan used high-pressure
sales tactics to sell penny stocks at inflated prices, court papers
said. The defendants profited by selling off their own "house
shares" before prices crashed, and tens of millions of dollars
were laundered through domestic and foreign bank accounts, the
"Those behind this scam berated and threatened victims, made
unauthorized trades, failed to execute sell orders and took their
clients for all they were worth," Spitzer said.
A team of federal agents culminated a three-year investigation
during raids Thursday morning, resulting in 17 arrests in New York
and one each in New Jersey, Florida and California.
The suspects were awaiting arraignment in Brooklyn federal court
on charges including securities fraud and money laundering, which
carries a maximum sentence of 20 years in prison. Defense attorneys
could not immediately be reached for comment.
The case reflects the Mafia's attempts to cash in on the
"tremendous profits" on Wall Street, said Robert Cordier, who
heads the FBI's criminal division in New York.
Last year, federal prosecutors in Manhattan charged 120 people,
including stock promoters and executives of Internet startups, with
strong-arming brokers and manipulating penny stocks in another $50
million scheme. The defendants included members and associates of
all five New York crime families, authorities said.