THE MOB ON WALL STREET--PART 2
A TALE OF TWO MARKETS
''Allie Shades'' Malangone is the Zelig of the Mob's Wall Street coterie. For years, he has been observed by investigators in lower Manhattan, ensconced in the twin worlds of the Fulton Fish Market and the stock market. To law enforcement he is an alleged loan shark and gambler, a longtime power behind Mob control of the Fulton market, and he is described in court proceedings by federal and state law enforcement officials as a capo in the Genovese crime family.
But to the very few Wall Streeters who know him, he is a sophisticated market player who is an expert at ''working the spreads''--getting in at the bid price and exiting at the ask price, with the help of cooperative traders. ''He's very smart, very articulate,'' says one investigator. ''When you hear him on the wire, he would couch what he would say in gambling phrases'' to mislead investigators.
Investigators are not fooled, but despite close surveillance and wiretaps dating back to the 1980s and perhaps before, they have been unable to make a case against Malangone and other reputed Fulton market mobsters for their suspected activities on Wall Street. One longtime Malangone-watcher recalls that the Fulton market was believed by law-enforcement authorities in the early '80s to be a clearinghouse for stolen bonds. But nothing was ever proven.
Investigators thought they were on to something, finally, in 1985. They had in their sights two big fish, so to speak--Malangone and Vincent Romano, also identified in court papers as an alleged Genovese family member who was suspected of involvement in the Fulton market. Malangone and Romano were probed by federal and local authorities for their alleged manipulation of a pharmaceutical company stock, Nu-Med Inc., a company that later declared bankruptcy. Investigators believed that the two men had a position in Nu-Med shares. The investigation was never made public, for authorities couldn't build a case against Malangone and Romano. Efforts to reach the two men were unsuccessful.
Sources on Wall Street say that Malangone was a behind- the-scenes player in the biggest penny-stock fiasco of recent years: Hanover Sterling. According to sources, Malangone controlled Hanover through his right-hand man, Alan Longo, who has been identified by federal authorities in court filings as a member of the Genovese family. Longo, who is described by acquaintances as a heavy gambler, is said by sources to have worked directly with Ageloff in Hanover and other market ventures.
Ageloff--in concert with his alleged Mob contacts--is believed by market sources to have been the hidden control person at Hanover. It went out of business in early 1995 and resulted in the demise of the firm that it cleared through, Adler, Coleman & Co. An attorney for the trustee in the Adler Coleman bankruptcy, Mitchell A. Lowenthal, says that his firm, Cleary, Gottlieb, Steen & Hamilton, has discovered evidence that 65% of Hanover's profits were shared by Ageloff and another Hanover official. Efforts to reach Hanover execs were unsuccessful.
Street sources say that the Mob was involved in both sides of the Hanover-Adler imbroglio. The Malangone-Longo-Ageloff faction, they say, profited from the runup in Hanover stocks, while other mobsters allegedly sold short the Hanover stocks and pushed their prices downward--to the chagrin of the Malangone faction. This internecine dispute, sources close to Hanover say, was eventually resolved without bloodshed, but only after some tense meetings between Mob factions. Lowenthal says that his firm's investigation has shown that ''Ageloff and some of the shorts were all connected [to the Mob] in one way or the other,'' but nothing was proven.
According to people close to the Hanover Sterling machinations, the Mob was represented on the short side through Falcon Trading Group and Sovereign Equity Management Corp. And those brokerages, sources say, are controlled by the alleged SC&T profiteer--a silver-haired, 51-year-old resident of northern New Jersey named Philip C. Abramo.
Abramo's name has never surfaced in any of the thousands of pages of deposition testimony taken by the adversaries in the Hanover-Adler Coleman legal warfare. Nor have his recent legal troubles--a federal fraud indictment-- resulted in exposure of his Street ties or alleged Mob membership. Abramo's stunning success at avoiding publicity has helped make him the most active reputed Mob honcho on Wall Street. ''He is educated. He sounds sincere,'' says one source. ''He's gotten all these wiseguys to work together.''
Listed in no official records is another address for Phil Abramo--one that is far more apropos for a man who is a hidden power in the brokerage industry. Until a couple of months ago, sources say, Abramo maintained an office on the 14th floor of 90 Broad St. in lower Manhattan, directly adjoining the New York office of Sovereign Equity Management. A door linked the two offices, and it was always open. ''I knew him as a stock promoter who always had stock deals. We hired brokers who were friends of his,'' says one Sovereign employee who requested anonymity. Sovereign CEO Glen T. Vittor denies that Abramo had any role in the firm.
But sources describe his role as central--as the hidden control person behind Sovereign, a prominent name in the micro-cap stock business, its sister firm Falcon Trading, and two other firms that are major penny-stock brokers and market makers, Toluca Pacific Securities Corp. and Greenway Capital Corp. He is also described by Street sources as controlling other dealers in small-cap stocks through brokers and traders owing allegiance to him.
On paper, Abramo is respectability personified. Over the past decade he has been listed as president or top shareholder of four publicly held investment companies. He is married, with a grown daughter. He has been a ''restaurant consultant,'' auto dealer, and construction company operator. He has had four years of college and may even have training as an accountant.
But inquiries about Abramo bring far from routine reactions. At Greenway Capital, President John Margiotta is asked if he knows Abramo. Margiotta replies: ''Who?'' and hangs up the phone. A person answering the phone at Greenway, moments later, says that Margiotta is ''very busy'' and ''not in the office.'' Toluca Pacific President Paul Fiorini, when asked about reports of Abramo's control of his firm, calls them a ''total farce.'' He says he owns 100% of the firm and goes on to say: ''Who is this person? I don't want my name associated with this. I don't know this person. I don't know Phil Abramo.''
The reason for the reticence is understandable. According to federal court records in recent tax-evasion proceedings against Abramo in Newark, the Saddle River (N.J.) resident lists his occupation as ''consultant.'' But elsewhere in the court file, the FBI gives a different version of his livelihood. In 1994, in an affidavit filed with the court in a bail hearing, the FBI identified him as a frequent visitor to reputed New York Mob boss John Gotti prior to his imprisonment in 1992, and alleged that Abramo held the rank of capo in the New Jersey organized crime family once headed by Sam ''the Plumber'' DeCavalcante. But sources say that since then, Abramo has risen in the ranks to No.2 in that crime family--underboss.
Abramo is easily the highest-ranking reputed mobster to be engaged full-time in Wall Street activities. His lawyer, Harvey Weissbard, declined comment on Abramo's alleged ties to organized crime. Asked about Abramo's possible role on Wall Street, Weissbard said he had ''no information of which I can respond one way or the other, and I doubt if I did know one way or the other that I would respond.''
Little is known about Abramo's early life, such as which college he attended. Except for a conviction for possession of stolen property in 1971 and another in 1973 for conspiracy to distribute heroin--which yielded him a seven-year prison sentence--he has stayed out of the limelight. Even when he was indicted in 1994 in New Jersey for allegedly swindling 300 people nationwide out of $1 million--they were sold phony ''lines of credit''--he received no publicity and continued to work on the Street.
Indeed, by the time he was indicted in the credit-line scheme, Abramo already had a lengthy, ostensibly legitimate track record. In the late 1980s Abramo founded publicly-held investment companies with names such as Cambridge Investment Service Corp. and American Acquisition Corp. (SEC filings by these companies show they did little but file papers with the SEC.) According to papers filed by Abramo with the SEC for the investment companies, Abramo was a ''restaurant consultant to Northern Roses Inc. (Miami, Fla.),'' during 1982, and ''was also a restaurant consultant to Bagel Nosh Inc. (1983 and 1984--New York, N.Y.).'' Abramo's Bagel Nosh connection is significant, because the company was brought public by Thomas J. Quinn.
Quinn was one of the most prominent figures in the penny-stock world, but his association with Abramo has never been made public, although regulators have long suspected it. When Quinn was jailed in France in 1988 for securities fraud, investigators say, Abramo's name was prominently displayed in a notebook that was seized from him. Calls in 1995 from Quinn's telephone to Abramo's unlisted home phone number also appeared in phone records that were recently subpoenaed by investigators seeking Quinn's assets. (He was successfully sued by the SEC for securities fraud in 1989 and owes millions of dollars in civil penalties.) Indeed, Abramo was subpoenaed to testify before the SEC in 1989 during a probe of Quinn, but he invoked his Fifth Amendment privilege against self-incrimination. Efforts to reach Quinn for comment were unsuccessful.
The Quinn-Abramo connection could become significant in the months ahead because of an ongoing federal grand jury probe in California into possible irregularities in the trading in Solv-Ex Corp., an Albuquerque-based company that claims to have a process for retrieving oil from tar sands. (Solv-Ex officials denied knowledge of any trading irregularities and claimed that a private investigator's report, which they refused to release, indicated there was no manipulation.) According to sources close to the grand jury probe, Abramo and Quinn are among those who have been a subject of the investigation.
Today, Abramo faces a one-year prison term for tax evasion. It was a plea bargain--the guilty plea to tax evasion in return for dropping of the loan-scheme charges. He is scheduled to report to prison on Jan. 7. While he may well handle his Street interests while incarcerated, in some quarters there is concern that his departure will mean an increase in violence.
The level of violence is becoming worrisome. Early in November, a broker at a New York-area brokerage was severely beaten, his arm broken, in the lobby of the firm. As so often happens in such situations, he did not notify the police. His offense: He moved from a Mob-controlled firm, taking his customers with him, and dared to sell their stocks. Sell pressure on stocks is just what the Mob despises (unless, of course, they are short). It can sour a deal--and the often immense profits that can come with it.
Even before the deal began, traders began receiving phone calls warning them not to short the IPO, which might have driven down prices. According to Wall Street sources, among the people who would have profited heavily from the Mama Tish IPO is John Gotti Jr., reputed acting boss of the Gambino family and son of the imprisoned Gambino crime family chieftain. According to Wall Street sources, ''Junior'' Gotti is the hidden owner or control person of one of the brokerages--other than Landmark--that was active in the Mama Tish deal. Had the deal gone through, any Gotti people involved in the deal would have profited handsomely from the 80% difference between the offering price and the trading price of the shares. Gotti was unreachable for comment. A company official said he did not know of any Mob involvement in the IPO.
If ''Junior'' Gotti represents the younger generation of reputed mobsters on the Street, the older generation would be epitomized by John ''Sonny'' Franzese. Franzese has been described by law-enforcement authorities for decades as an influential, feared mobster who allegedly was the former underboss of the Colombo crime family. Sources say Franzese joined the Mob's rush to the stock market after his release on parole from a 50-year term for bank robbery in 1994. According to sources, the 77-year-old reputed Mob elder described himself to associates earlier this year as controlling, through a confederate, Monitor Investment Group, whose brokers allegedly ripped off the West Coast investor by promising a guaranteed runup. Monitor chairman William F. Palla denies that Franzese or organized crime has ever played any role in the firm.
Monitor, which ceased active operations last June, is described by former employees as a center for widespread stock manipulation--specifically involving boxing of International Nursing Services, Beachport Entertainment, and Innovative Medical Services. Officials of the three companies say they were unaware of any irregularities in the trading of their stocks. International Nursing Chairman John Yeros, however, concedes he felt something was amiss at Monitor when he attended a presentation the brokerage sponsored for International Nursing at a downtown hotel--and found that Monitor had hired a hooker to ''service'' the brokers in attendance. Palla says he heard of the ''hooker incident'' but denies Monitor retained that person.
If Franzese in fact became involved in the penny-stock business, it would be a potent sign of the lure of the penny-stock business to the Mob. But like Abramo, Franzese may have to cool his interest in the market for a while. He was recently found to have violated the terms of his parole and was ordered back to prison.
One reputed up-and-comer in the Street's Mob contingent is Dominick ''Black Dom'' Dinassio, who is said by Street and law-enforcement sources to hold sway over Euro-Atlantic Securities, a Manhattan brokerage that is active in penny stocks. According to a source in the Manhattan District Attorney's office, Dinassio is allegedly an associate in the Colombo crime family.
Law-enforcement sources say that Dinassio has lately been observed in the company of Longo, Malangone's longtime partner. Sources say a short-seller who was active in shorting Hanover stocks, John Fiero, told police recently that Dinassio threatened him for his trades in one stock brought public by Euro-Atlantic, Hollywood Productions Inc. Fiero refused comment and company officials did not return phone calls. Contacted at Euro-Atlantic's office in lower Manhattan, Dinassio declined to discuss his role at the firm. Asked about the allegations that he was connected to organized crime, he replied: ''What? I think you're crazy, buddy. I'll talk to you later,'' and hung up. Euro-Atlantic officials did not return phone calls.
Although whistle-blowers in Mob-run firms are rare, the increasing violence is beginning to enter the public record. At Monitor, the firm Franzese allegedly claimed to control, an incident last January led to a rarity in this world--a lawsuit. In a suit filed in U.S. District Court in Manhattan, former broker Robert Grant contends that he was ''maliciously and violently struck, battered, beaten, pummelled, pushed, punched, and attacked'' by Monitor employees at the instigation of Palla and another manager. At one point, the suit says, Grant was beaten with a chair. The lawsuit does not say so, but witnesses say that another broker was also viciously assaulted. Neither Grant nor the other broker would comment, and Palla says he was in Philadelphia at the time of the incident, which he describes as a ''fight.'' One witness says Monitor management suspected that the two brokers may have been short-selling Monitor's favorite stocks.
Some of the most violent, crudest elements to come to the Street are part of its fastest-growing contingent--the Russian Mob, based in the Brighton Beach section of Brooklyn. ''Over the past couple of years, they've put people in the [brokerages], kids with clean records, and they're washing money legitimately,'' says one law-enforcement official who is intimately familiar with Russian organized crime. The offspring of two major Russian mob figures, he notes, have been active on Wall Street.
The Mob's fascination with Wall Street is understandable, for they have had little to fear from law enforcement or regulators. If the authorities, finally, act against Mob members who are active on the Street, it will be the first such prosecution since 1973, when three major Mob figures were imprisoned for securities fraud. At the time, the Mobsters were vanquished because one of their confederates became a government witness. ''It's practically impossible to prosecute these people unless you have a turncoat, somebody who can walk you through all those transactions,'' notes Ira Lee Sorkin, a former SEC regional director who was involved in the 1970s prosecutions. So long as the Street continues to keep silent on the Mob in its midst, organized crime will continue to be the silent partner of the financial markets.
Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.