Mafia mega scam rocks Wall Street

Victims of the scheme are reeling to the tune of $US50m, reports DAVID USBORNE.

A Mafia bust in New York has cracked open a stockmarket scam described as the biggest securities fraud in United States history.

Charges against 120 defendants, most of whom have been arrested, range from racketeering, bribery and extortion to solicitation to murder.

"We are announcing today the largest securities fraud take-down in history," said US Attorney Mary Jo White.

The defendants are accused of using a variety of means to inflate and manipulate stock prices for enormous financial gain.

They allegedly used traditional "boiler room" techniques, punting stocks at excessive values by telephone, and also by means of financial websites on the internet.

The swoop nabbed the largest number of people accused of financial crime in American history. While some were well-known associates of the Mafia, others were seen as upstanding members of the community.

Those dragged from their homes and offices included members of the five New York crime "families," 57 licensed and unlicensed stockbrokers and advisers, union officials, a hedge fund manager and a former New York detective.

Others included 30 officers of publicly traded companies whose shares were linked to the scams.

Ms White said the activities of those accused had cost the victims of the schemes about $US50 million ($106 million).

The case rocked Wall Street, which will be forced to contemplate again the extent to which the Mafia has invaded it. The court documents accuse leading members of the Colombo and Bonanno crime families of recruiting help from the three remaining Mafia clans in New York to run the stock schemes.

They exerted control over scores of brokers in the financial district, forcing them to manipulate stock prices either by offering financial incentives or threatening with violence or even death.

In some cases, said prosecutors, the main players in the operation had control over entire departments of brokers in unsuspecting Wall Street firms.

"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," said FBI assistant director Barry Mawn. "Violence and the threat of violence."

The case offers proof that as other areas of traditional profit have been closed to it by tougher law enforcement, the Mafia has turned to Wall Street in search of new opportunities, especially during the recent boom in high-tech companies.

Mafia infiltration of the stock world has already caught the imagination of Hollywood in the film Boiler Room and the television series The Sopranos.

The court papers stressed that one of the scam's tactics was to lie to investors that certain stocks were in new dot.com and internet companies when they were not.

As part of the scheme, the Mafia clans ran an outwardly respectable bank in lower Manhattan called the DMN Capital Investment Bank. It had been bugged by the FBI since last December.

"It was truly an investment bank to the crooked and the corrupt," Ms White said.

Nineteen publicly traded companies were cited in the court papers as having been knowingly involved in the schemes.

Among those arrested was the chief executive officer of Ranch+1, a chain of New York fast-food restaurants, and the firm's vice-chairman.

Officials from union pension schemes were also among those arrested.

- INDEPENDENT