- The Washington Times - Thursday, June 15, 2000

NEW YORK Federal authorities yesterday brought charges against 120 persons, including members of New York City's organized-crime families, in what they called the largest securities fraud crackdown in U.S. history.
U.S. Attorney Mary Jo White said the defendants, about 100 of whom had been taken into custody by late yesterday, engaged in a far-reaching fraud that stretched over five years. Never before have so many people been charged at once in such a case, she said.
Richard Walker, director of enforcement of the U.S. Securities and Exchange Commission, called the crimes "among the most egregious witnessed in recent years."
As part of the overall scheme, the Internet was sometimes used to promote stocks, and companies were falsely touted as dot-com companies to induce investors to capitalize on the Internet boom, prosecutors said.
In one instance, those charged in connection with the fraud ring are accused of scheming to sell their own shares of stock in Spaceplex Amusement Centers International, Reclaim Inc., Beachport Entertainment Group Inc. and International Nursing Services Inc. at inflated prices, prosecutors said.
People involved in the scheme bought a substantial amount of stock of those companies, according to the SEC, then paid bribes to brokers who convinced unwitting investors to buy those shares from them. The stock purchases netted those involved in the fraud ring $8 million in illegal profits.
People involved in the fraud paid bribes to 13 brokers in exchange for convincing investors to buy Spaceplex Amusement Centers stock, the SEC said.
They paid bribes to 15 brokers in exchange for convincing investors to buy stock in Reclaim Inc.
In another instance, a group raised $2.7 million through five fraudulent offerings of stock. People involved in the ring paid others commissions of 30 percent to call potential investors and convince them to invest in companies, the SEC said. The callers lied by telling investors that companies they were investing in would soon have an initial public offering, and they often lied about the company whose stock they were selling, claiming the companies were involved in the Internet.
Callers also used telephone forwarding services so potential investors couldn't determine their actual locations.
The charges were detailed in 16 indictments and seven criminal complaints unsealed in U.S. District Court in Manhattan. The schemes allegedly resulted in total losses of more than $50 million.
Among those charged in the mammoth scheme were 10 reputed members and associates of organized crime, a former New York police detective, a West Coast investment adviser, stock promoters, brokers, and officers, directors and other insiders of several companies.
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."
"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," he said.
Arrests occurred in New Jersey, New York, Connecticut, Pennsylvania, Maryland, Virginia, Georgia, Florida, Alabama, Texas, Illinois, Utah and California, Mr. Mawn said.
Vadim Steven Shapiro, 28, of Baltimore was among those charged yesterday, according to the SEC.
The participants allegedly engaged in racketeering, using bribery, extortion and even soliciting murder to further frauds that reaped millions of dollars in illegal profits.
As part of the scheme, members and associates of the Bonanno and Colombo organized-crime families allegedly forged alliances with members and associates of other New York organized-crime families.
They then sought to defraud union pension plans, using a kickback and bribery scheme and Internet techniques to carry out their crimes, prosecutors said in a statement.
When those techniques failed, they resorted to threats, extortion, physical intimidation and the solicitation of murder to further their goals, they said.
The criminal enterprise allegedly tried to manipulate eight publicly traded securities and to defraud investors in connection with three private placements of securities, including one by Ranch 1 Inc., a company that operates fast-food restaurants in the New York City area and elsewhere.
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.
Staff writer William Glanz contributed to this report in Washington

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