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. Last Updated: 07/27/2016

19 Charged in Mob Bid on Wall Street

NEW YORK -- In what federal investigators described as the most ambitious scheme by organized crime to infiltrate Wall Street in decades, the government charged 19 men with duping investors in seven states to make millions of dollars in profits.


Prosecutors said Tuesday the case clearly indicated that organized crime was training its sights on the lucrative bull market after law enforcement efforts had curtailed its influence in garbage hauling, garment businesses and the Fulton Fish Market.


"Over the past several years, we've witnessed expansion in our securities markets and we've seen tremendous returns for our investors,'' said William McLucas, the director of enforcement for the Securities and Exchange Commission. "Not surprisingly, that success has attracted the success of criminal elements.''


The case involved a high level of cooperation between the Bonanno and Genovese crime families and payoffs to half a dozen brokers at a small Wall Street brokerage house, Meyers Pollock Robins Inc., prosecutors said.


"The mob has never seen a market that they didn't want to manipulate,'' said James Kallstrom, head of the FBI's New York office.


Under the scheme outlined in the 97-page racketeering and stock fraud indictment Tuesday, the Bonanno and Genovese families were said to have bribed the small group of brokers at Meyers Pollock to sell stock in a company that owns fitness clubs, officials said.


Working with an associate of one of the defendants, Frank Lino, a captain in the Bonanno family, the indictment said the families entered into an agreement with Gordon Hall, the chief executive of Healthtech International, based in Mesa, Arizona, to artificially inflate the value of his company's stock.


After the brokers pushed Healthtech's stock price to as high as $3 a share, using high-pressure tactics to sell shares to investors by telephone, the conspirators sold the shares they owned before the price plummeted.


Authorities said that investors in seven states lost millions of dollars in the conspiracy, although they could not say how many people had lost money. The scheme began last January and continued at least until Nov. 17, when the SEC suspended trading in Healthtech stock, which last traded at slightly over $1.


Mary Jo White, the U.S. attorney for the Southern District of New York, said that shortly after the defendants began to manipulate the stock, which is listed on the Nasdaq Small Cap Market, the volume of trades in Healthtech's stock increased by 250 percent, and the stock's closing price shot up by 52 percent. White said the defendants made more than $1.3 million in the scheme, and investors lost more than $3 million.