Wednesday, June 9, 2010

"Feds Raid Bonanno Family Boiler Room"

A blast to/from the past.*
Frpm MyFox's Manhattan News:
NEW YORK - The FBI says it's raided a Manhattan boiler room brokerage with links to the mob.
Agents arrested several people Wednesday at an office building on West 36th Street. The FBI said one of the suspects was a member of the Bonanno organized crime family.
Authorities said the illicit brokerage was artificially inflating the value of a stock in a company with misleading sales pitches.
The suspects were expected to appear in court later Wednesday.
HT: to DealBreaker for both the story and the headline.

*Here's the amazing piece of journalism that Gary Weiss did for BusinessWeek in 1996:

A three-month investigation reveals that organized crime has made shocking inroads into the small-cap stock market
In the world of multimedia components, Phoenix-based SC&T International Inc. has carved out a small but significant niche. SC&T's products have won raves in the trade press, but working capital has not always been easy to come by. So in December, 1995, the company brought in Sovereign Equity Management Corp., a Boca Raton (Fla.) brokerage, to manage an initial public offering. ''We thought they were a solid second- or third-tier investment bank,'' says SC&T Chief Executive James L. Copeland.

But there was much about Sovereign that was known to only a very few. There were, for example, the early investors, introduced by Sovereign, who had provided inventory financing for SC&T. Most shared the same post office box in the Bahamas. ''I had absolutely no idea of who those people were,'' says Copeland. He asked Sovereign. ''I was told, 'Who gives a s---. It's clean money.''' The early investors cashed out, at the offering price of $5, some 1.575 million shares that they acquired at about $1.33 a share--a gain of some $5.8 million.

By mid-June, SC&T was trading at $8 or better. But for SC&T shareholders who did not sell by then, the stock was an unmitigated disaster. Sovereign, which had handled over 60% of SC&T's trades early in the year, sharply reduced its support of the stock. Without the backing of Sovereign and its 75-odd brokers, SC&T's shares plummeted--to $2 in July, $1 in September, and lately, pennies. The company's capital-raising ability is in tatters. Laments Copeland: ''We're in the crapper.''

A routine case of a hot stock that went frigid. Or was it? Copeland didn't know it, but there was a man who kept a very close eye on SC&T and is alleged by Wall Street sources to have profited handsomely in the IPO--allegedly by being one of the lucky few who sold shares through a Bahamian shell company. His name is Philip Abramo, and he has been identified in court documents as a ranking member, or capo, in the New Jersey-based DeCavalcante organized crime family.

James Copeland didn't know it. Nobody at SC&T could have dreamed it. But the almost unimaginable had come true: Copeland had put his company in the hands of the Mob....MORE
 Going through the indictments and subsequent trial transcripts was such fun.
The nicknames and even the A.K.A's were hilarious: "Alan Benlolo aka Allen Bender aka Haime Escalante" etc.