THE MOB IS BUSIER THAN THE FEDS THINK
How prevalent is the Mob on Wall Street? It's a question that was first raised a year ago, when BUSINESS WEEK revealed widespread Mob infiltration (BW--Dec. 16, 1996). The issue has again reared its head in the aftermath of the Nov. 25 securities fraud indictment of 19 people, including four alleged Mob figures. At the press conference announcing the indictment, the U.S. Attorney in Manhattan, Mary Jo White, maintained that the Mob presence is ''isolated.'' But is it?
BUSINESS WEEK's chop-stocks investigation shows that the Mob is far more active on Wall Street than might appear from the public pronouncements of regulators and law enforcement officials. Among the firms that have allegedly been subject to Mob influence or ownership are the New York office of Brauer & Associates Inc., a Florida-based brokerage where stock promoter James P. Minsky was briefly employed, and Adler Coleman Clearing Corp., a former clearing firm. Adler went out of business in 1995, after the demise of Hanover Sterling & Co., a noted chop house.
The alleged Mob connection to Adler apparently had its genesis three years ago. In a deal brought together by Stratton Oakmont Inc., Adler Coleman was funded through a company called Atrium Holding Co. According to private-placement documents obtained by BUSINESS WEEK, one of Atrium's largest investors was Philip Barretti Sr., an alleged associate in the Gambino crime family. In July, Barretti pleaded guilty to charges that he participated in a cartel that controlled New York City's trash-hauling business and agreed to a prison sentence of 4 1/2 to 13 years and $6 million in fines and court costs. Edward J. Cohan, chief executive of Atrium and Adler, says he was unaware of Barretti's involvement in the financing. Barretti was unavailable for comment.
The Mob has also allegedly found its way into short-selling of chop stocks. According to traders and chop-house officials, Barry Gesser, a close friend of Stratton founder Jordan Belfort, has systematically shorted chop stocks. He has allegedly demanded cash from chop houses in return for not shorting the stocks, or has demanded cheap stock to cover his shorts, threatening to ''crush'' the stocks if he doesn't get his way.
The alleged Mob link is a Gesser associate--a 28-year-old native Long Islander named Michael Reiter. Reiter's very presence at Gesser's side gives him clout by dint of Reiter's link to the Gambino crime family, Street sources say. Reiter's father, Mark Reiter, is a friend of former Gambino boss John Gotti and is serving two life terms in a federal prison for narcotics trafficking.
FAMILY TIES. Michael Reiter and Gesser both deny that they have ever engaged in anything that smacks of extortion. ''The conversations that you're referring to--I'm not going to say it's a figment of everyone's imagination when you're saying people come to us or we go to people about cheap stock,'' says Gesser. As Gesser tells it, he is often approached by chop houses whose stock he has shorted and asked: '''What will it take for you guys to go away--to drop the stock?' That kind of conversation takes place.'' Gesser asserts his answer is: ''You can't buy me.'' But he says that if he has shorted a stock and is offered cut-rate stock to cover it, he takes it. That, he maintains, is not extortion.
Brauer's alleged ties to the Mob are being examined by investigators. According to sources familiar with the FBI's probe, federal agents have identified Brauer's New York office as being controlled by elements of the Colombo crime family--notably Joseph M. Baudanza, a broker there who is described by a law-enforcement source as an associate in the Colombo crime family. Law-enforcement officials say Joseph Baudanza is a son of a reputed Colombo family member and a cousin and close associate of 27-year-old John Baudanza, an alleged up-and-coming member of the Colombo family. John Baudanza is described by law-enforcement sources as working with his cousin and other kinfolk on the Street. Neither John nor Joseph Baudanza returned
BUSINESS WEEK's calls. John Kiefner, an attorney for Brauer, denies organized crime involvement in the firm and says the New York office is independently owned.
The Baudanza ascendancy is in sharp contrast to the fate of another alleged Mob figure from recent Wall Street history--reputed DeCavalcante family capo Philip Abramo. Abramo, who was jailed on tax evasion charges in January, allegedly held sway over several brokerages in New York and Florida. But since his release from prison a few weeks ago, he has been studiously avoiding his old haunts in Manhattan's financial district and in the glitzy office complexes of South Florida. And that makes sense--the feds are starting to turn up the heat. Abramo may be gone, but he won't be missed. There are plenty of his colleagues who are only too happy to take his place.
By Gary Weiss in New York
Updated Dec. 4, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.