THE MOB ON WALL STREET: WHY YOU CAN'T SEE ITAn inside look at how organized crime hides its involvement in stock deals
Early in the morning of Jan. 7, 1997, a television camera crew was staked out near 215 Oxford Ave. in Saddle Brook, N.J., a quiet suburb about a half-hour's drive from New York City. But the man who lives at that address, Philip C. Abramo, did not emerge. A day earlier, he had left to stay overnight near his new home--the Fort Dix federal correctional facility in central New Jersey, where he was about to begin serving a one-year term for tax evasion. The well-timed departure was quintessential Abramo--whose almost perfect record at avoiding publicity has cemented his role as a leading reputed Mob figure on Wall Street.
For years, Abramo has managed to avoid official scrutiny while allegedly controlling at least four brokerage firms and exerting a wide-ranging influence over the huge market for ''chop stocks''--Street lingo for easily manipulated micro-cap stocks (BW--Dec. 16). Nothing has put Abramo on the regulatory radar screen--not his indictment in a consumer fraud scheme, not his guilty plea to tax evasion. Not even his rise to the rank of capo in the DeCavalcante crime family, according to a 1994 FBI court affidavit.
How do Abramo and other reputed Mob financiers and stock promoters keep their machinations from regulatory and public scrutiny? The answer to this question can be summed up in two words: offshore companies.
Usually, the offshore financial mechanisms used by the Mob are enmeshed in secrecy. But lately some answers have turned up--all surrounding the December, 1995, initial public offering of a small Phoenix-based company that makes multimedia components, SC&T International Inc. At the center of this tale are a half-dozen shadowy Bahamian entities and Sovereign Equity Management Corp., which brought SC&T public. Street sources say Sovereign is controlled by Abramo through a man named Philip Gurian, whose National Association of Securities Dealers registration was revoked in 1991.
Gurian was the key player in organizing the offshore financial conduits that handled the SC&T deal. Also playing a pivotal role is a prominent Bahamian, the son of the island nation's former Prime Minister, Lynden Pindling. Also allegedly involved in the SC&T deal is a man described by Street sources and investigators as a longtime associate of both Abramo and Gurian--Thomas F. Quinn, a disbarred lawyer and convicted securities swindler with a two-decades-long history of running investment scams worldwide.
With its unlikely cast of characters, the tale of SC&T and the Mob is a prime example of how the Mob exploits companies and walks away unscathed, and, almost inevitably, unexposed. In the process, investors in small-cap stocks are routinely ripped off. By the time the public buys the shares at the IPO, the Mob has already cashed in cheap stock that it obtained well in advance. For SC&T's shareholders, the horror story did not begin until last year, when the company earned the distinction of being one of the worst performing stock issues in the NASDAQ small-cap market. But for the few who profited from the deal, the SC&T story begins late in 1994.
Back then, all looked promising. The company was about to get some preliminary financing. SC&T's chief financial officer dashed off a routine letter to the underwriter--Sovereign--on Dec. 19, 1994. The letter was addressed to ''Mr. Phil Gurian, Sovereign Equity Management.'' But there was no Phil Gurian at Sovereign. Not officially.
In fact, Gurian's role at Sovereign and the SC&T deal was crucial. Sources who are well acquainted with Gurian say that for years he has been the New York-based Abramo's key confederate at Sovereign's Boca Raton (Fla.) headquarters and serves a similar function at its sister company, Falcon Trading Group Inc. In the words of one former SEC organized crime investigator, the two men are closely linked--the ''two Phils,'' as he calls Gurian and Abramo. Both men also are alleged by investigators and sources to work closely with Quinn, whom they described as a master at organizing stock deals and high-pressure ''boiler room'' operations that sell stock to the public. One investigator, who has examined phone records of both Quinn and Gurian subpoenaed in an SEC lawsuit against Quinn, notes that there were phone calls between Gurian and Quinn--and between Abramo and Quinn--in 1995, while the SC&T financing was under way. There were also calls from Quinn to Falcon.
SMALL TALK? Gurian denies having any role at Sovereign or Falcon, but says that he is often at Sovereign because of his close friendship with its former president, Glen T. Vittor. (The December, 1994, letter was sent to him at Sovereign, Gurian says, because of his frequent visits to the firm.) Sovereign Compliance Director Thomas W. Hands denies that Abramo, Quinn, or Gurian have any role at the firms. Gurian readily admits that he had frequent phone contact with Quinn in 1995, but says that he discussed a variety of innocuous things. ''We talked about hockey,'' says Gurian. He says that he knows Abramo, but only as a ''stock promoter.'' Gurian denies any business dealings with Quinn or Abramo.
Although only in his mid-thirties, Gurian has long been enmeshed in the world of ''chop houses''--dealers in penny stocks such as Blinder, Robinson & Co., where he worked in the early 1980s.
In 1991, Gurian's registration was revoked by the National Association of Securities Dealers for nonpayment of fines imposed in disciplinary proceedings. But apparently, it didn't spark a career change for Gurian. In early 1994, the NASD brought charges accusing Gurian of working as a trader at Falcon without being registered and said he and Falcon had failed to honor trades from other brokerages. The NASD permanently barred him from the securities business. Gurian appealed, but the action was upheld in March, 1995.
But even though he was twice ordered to stay clear of the brokerage business, Gurian had a major role in the SC&T financing. That is clear from internal records produced under subpoena by SC&T in court proceedings brought against Sovereign, Falcon, and other firms by Edwin B. Mishkin, court-appointed trustee for the bankruptcy of Adler, Coleman Clearing Corp. Adler collapsed after the demise of the penny-stock firm Hanover, Sterling & Co., and Mishkin has filed suits accusing short-sellers, including Sovereign, Falcon, and Gurian, of causing Hanover's demise. The two firms and Gurian are fighting the suits.
The internal SC&T records subpoenaed by Mishkin in the suits include letters written by SC&T's then chief executive, James L. Copland, and addressed to ''Phil and Glen''--Sovereign former President Vittor and the barred broker, Gurian. Copland, who remains chairman but has since stepped down as SC&T's CEO, did not return phone calls. SC&T's new CEO, Thomas Bednarik, declined comment. SC&T's attorney, Sara R. Ziskin, said that company officials would not be interviewed for this article. In a previous interview, Copland acknowledged Gurian's key role in the financing but denied any knowledge of an organized crime role.
ANGRY LETTER. Gurian acknowledges that he worked on the financing--but insists that he did all that work out of friendship for Vittor. ''I didn't get paid a penny for that deal,'' he says. But Hands insists that Gurian is mistaken, and that he had no role in the IPO, paid or unpaid.
The Gurian-Vittor-SC&T correspondence was sometimes acrimonious. At one point, Copland expressed irritation at being put off when he asked where the money for the company was coming from. ''Yes, I do care fellows, who is funding it all, and right now I have no idea!'' said an exasperated Copland in a letter to ''Glen and Phil'' on May 15, 1995.
By the time Copland wrote that letter, SC&T already had gone through its first wave of interim financing. In April and May, Gurian and Vittor raised $2.5 million for SC&T by selling notes, warrants, and stock, mainly to six Bahamian investors: Maraval & Associates, Bauman Ltd., Caspian Consulting, Robert Adams, Roddy DiPrimo Ltd., and Ubiquity Holdings. In the IPO, the Bahamians cashed out for $5 apiece the 1.6 million shares they acquired at $1.33 a share--a gain of $5.8 million.
Copland would have gotten little information on the people funding his company--the Bahamians--from his own prospectus. The ''beneficial owners'' of the companies, listed in the prospectus, appeared to have no apparent links to either SC&T or Sovereign, which brought the company public. Who put the money into those Bahamian entities? Gurian won't say. But there is one solid clue to the people who were getting in on the ground floor of the SC&T deal.
Not long after the Bahamians were snapping up cheap shares, some two dozen individuals participated in the company's smallest round of financing. Some $875,000 in notes and SC&T stock were sold in a Sovereign-managed deal in August and September, 1995. The names were listed in the footnote to an SC&T filing with the SEC in November, 1995. Three of the 24 names have a familiar ring to them--Abramo and Quinn. Among the buyers of the private-issue shares and notes, duly redeemed in December, 1995, were Romilda Abramo--the wife of Phil Abramo--Frank Quinn and Laura Quinn. According to an investigator who has long tracked Thomas Quinn, Frank Quinn is the father, and Laura Quinn the aunt, of Thomas Quinn.
Quinn is the subject of a $25 million civil judgment arising from SEC proceedings involving stock deals in the 1980s, and investigators for the SEC are exploring the possibility that Frank and Laura Quinn have been used as thinly concealed fronts for Thomas Quinn. Quinn's attorney declined comment. Likewise, Romilda Abramo might easily have been a proxy for her husband. Indeed, their house in Saddle Brook is in her name as well. Efforts to reach Frank and Laura Quinn and Romilda Abramo were unsuccessful.
The presence of the Quinn and Abramo kinfolk is among the most compelling evidence of links between the two men--and their links to the SC&T deal. Another link between Quinn and the Bahamian companies appears in the phone records subpoenaed by the SEC in its legal tussles with Quinn. A source says they show calls from Quinn to a Bahamian company called Pindling & Co. during 1995.
Pindling is a crucial name in this saga. L. Obafemi Pindling is a registered agent for Ubiquity and the other Bahamian firms involved in the SC&T deal. (''Umbiquity'' is the name that appears in SEC filings but is apparently a misspelling.) Pindling is the son of Lynden Pindling, who was for many years Prime Minister of the Bahamas. How did such a prominent Bahamian get involved in setting up the Bahamian firms? Obafemi Pindling did not respond to phone calls and faxes to his office in Nassau.
PRIME MOVER. Pindling handled the paperwork involved in organizing the Bahamian companies. But by all accounts, he had no role in running them. Who did? Quinn may have had a role, as the phone records imply. But the man who had the leading role in operating those companies was none other than the ubiquitous Philip Gurian. Abramo's alleged associate was not only the prime mover behind the SC&T financing but also was instrumental in the operation of the offshore entities, which were set up in early 1994 and did more than just buy SC&T stock. Mishkin recently sued Ubiquity, Maraval, Caspian, and Bauman, claiming they received proceeds from improper short-selling of Hanover stocks. Gurian dismisses the suit as ''bull.'' A similar suit against DiPrimo recently resulted in a $150 million default judgment, which DiPrimo is appealing.
Gurian's involvement in the Bahamian companies would ordinarily never have come to light. Not a word was said about him in the SC&T prospectus or in the papers filed with the SEC by the offshore entities in connection with the offering. But there was an unforeseen development. Several months after the SC&T offering, some $1.7 million allegedly disappeared from Ubiquity's accounts held at a Canadian brokerage. In a suit filed against the brokerage and others by Ubiquity, the firm notes that the person who ''provided all trading instructions'' for the firm was none other than Phil Gurian. Gurian describes himself as merely an ''adviser'' to the Bahamian accounts. But he acknowledges that he directed the trading for Ubiquity and other Bahamians involved in the SC&T deal.
The case of the missing $1.7 million is a saga within a saga. Ubiquity claims in the suit that the money was stolen by a Canadian broker and a convicted penny-stock manipulator, Eric Wynn--whose ''coffee'' meetings with President Clinton have lately gained notoriety. Efforts to obtain an interview with Wynn, who recently began serving a prison sentence for securities fraud, were unsuccessful. In a statement to BUSINESS WEEK, he denies involvement in any theft and claims the theft never took place. Wynn says that Gurian falsely claimed that the money was stolen. He maintains that Gurian hatched a scheme to defraud the Canadian broker and its insurance company by falsely claiming the loss and then unsuccessfully sought to involve Wynn in the scheme. Gurian vigorously denies Wynn's allegations.
The Royal Canadian Mounted Police investigated the reported disappearance of the money--and came up with an intriguing tidbit about Ubiquity's ownership. According to a summary of the RCMP investigation, a copy of which was obtained by BUSINESS WEEK, an ominous incident took place after the money was found missing. A Canadian broker, accused in the suit of joining with Wynn in stealing the money, was visited in a Manhattan hotel room in mid-1996 by Gurian and what the report describes as ''three males.'' An RCMP investigator, who requested anonymity, says the three were described to the RCMP as ''hoodlums.''
Gurian says he brought along three ''friends'' to intimidate the broker, but denies they were ''hoodlums.'' He also denies reports, from sources familiar with the incident, that one of the three was an angry Abramo, who allegedly claimed the stolen money was his. Abramo's lawyer, Harvey Weissbard, declined comment.
BIG LOSERS. Whoever owned the money, it would seem Ubiquity and the other Bahamian entities were linked. A Dec. 20, 1995, letter from Sovereign's Hands instructs SC&T to make payments for all the Bahamian entities to a bank account in New York City--for the benefit of a single account at Pindling & Co. If Ubiquity was the victim of a heist, it was not the only party to the SC&T saga to have lost big. SC&T shareholders saw their shares, which went public at $5, climb to $8 in June before plummeting to pennies by yearend. Sovereign ceased supporting the stock.
For his part, Abramo, though incarcerated, has ensured that he remains current on activities in his old stomping grounds--Wall Street. And it is no surprise that the man who sources say is filling in for Abramo on the Street has also made a fetish of secrecy. He is an Abramo confidant who goes by the name of ''Lou''--a man who is so averse to publicity that only his closest confederates know his last name. Lou has been seen in New York City, Long Island, and Florida, watching out for the interests of his imprisoned associate. But if he decides someday to expand his vistas to the Bahamas, he will find the welcome warm and the wall of silence as comfortingly high as ever.
By Gary Weiss in New York
Updated June 15, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.