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Investors Victimized in Stock Scam

June 17, 1999

NEW YORK (AP) _ Thousands of unsuspecting investors have lost more than $100 million to an alleged network of rogue brokers pitching worthless stocks at exaggerated prices.

Three separate indictments unsealed Wednesday in Brooklyn alleged that nine corrupt brokerage firms _ including some with ties to organized crime _ used high-pressure and misleading sales techniques to inflate the value of 20 microcap stocks. Some of the 85 defendants named in the indictments cashed in by dumping the small-company shares at the inflated prices, authorities said at a news conference.

``The mob never saw a market it didn’t want to control,″ said Lewis Schiliro, head of the FBI’s New York office.

U.S. Attorney Zachary Carter said authorities relied on an ongoing series of undercover operations to reveal the ``classic boiler-room″ securities fraud schemes. The schemes, which date to 1991, involved ``a nest of securities scam artists who worked in close cooperation, migrating from brokerage firm to brokerage firm,″ he said.

One $10 million scam was led by two associates of the Colombo crime family and one from the Bor Russian crime group, authorities said.

The reputed mobsters allegedly infiltrated now-closed New York branches of Global Strategies Inc., Amerivet Dymally Securities and First National Equity Corp. They paid kickbacks to registered and unregistered brokers as incentive to cold call potential investors and pitch dubious startup companies, including one which claimed to be developing golf courses in the South, authorities said.

Defendants in a similar plot laundered millions of dollars in illegal proceeds through offshore bank accounts, authorities said. The funds were eventually wired to Nevada casinos, where they were withdrawn in cash.

The defendants were arraigned in Brooklyn federal court on charges including securities fraud conspiracy, mail and wire fraud, money laundering and obstruction of justice. The most serious charges carry a maximum sentence of 20 years in prison.

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