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Burden of Proof

Wall Street Organized Crime: Members of Five New York Mob Families Arrested in Largest Crackdown on Securities Fraud in U.S. History

Aired June 16, 2000 - 12:30 p.m. ET



ROBERT CASTELLI, JOHN JAY COLLEGE: The new generation of mobster who's better educated and more diversified, shall we say, in their business techniques that this is a place that they can make a lot of money, launder a lot of money, infiltrate legitimate businesses.

MARY JO WHITE, U.S. ATTORNEY: The lesson to be learned is that the price of quick and criminally earned profits in the stock markets will be arrest, prosecution and jail.


ROGER COSSACK, CO-HOST: Today on BURDEN OF PROOF: The FBI busts an organized crime ring on Wall Street. Members of five New York mob families and a former police detective are arrested in the largest crackdown on securities fraud in U.S. history.

ANNOUNCER: This is BURDEN OF PROOF, with Greta Van Susteren and Roger Cossack.

COSSACK: Hello and welcome to BURDEN OF PROOF. Greta is off today.

Federal prosecutors charge that Mafia members engaged in racketeering, extortion and solicitation of murder in a securities fraud scheme that reached from New York to California.


BARRY MAWN, FBI: It is clear that organized crime has sought to regroup and to search for new sectors of the economy to infiltrate. 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: violence and the threat of violence. When the mob enters the new world of white collar crime, it brings along its traditional tools of the trade.


COSSACK: And joining us from New York is criminal defense attorney Gerald Lefcourt. Also joining us from New York is former prosecutor Jerry Bernstein, as well as mob specialist and professor of criminal justice Robert Castelli. And here in Washington, Justin Pullen (ph), former federal prosecutor Marty Rogers, and Andy Polk (ph). And in the back, Gideon Goff (ph), Justin Dunn (ph) and Toby Latham (ph).

Bob, I want to go right to you. Tell us the story of what the mob is alleged to have done in this situation?

CASTELLI: Well, the brief explanation is they've infiltrated some of the smaller companies, the companies, some of the smaller trading houses, by putting people into them, by investing into their houses, or some cases by setting up smaller houses and thereby using it to garner a legal profit-taking not dissimilar to the way other people on Wall Street have used to engage in criminality to, you know, get the upper hand; you know, the first mover advantage.

COSSACK: Well, this has been called a pump-and-dump scheme. And I think -- as I understand what that means is, is that the stock is artificially inflated. The people on the inside own the stock at a lower price. When they get it inflated, then they go ahead and sell it. Why is -- as you said, it's not any different than what's happened before, but is it different that the mob has moved into this? and how have they done it?

CASTELLI: Well, I think so. You know, I think, you know, when you look at traditional organized crime -- and we differentiate between that and other forms of organized crime in that traditional organized crime is La Cosa Nostra, or what we affectionately call the "Mafia" -- they found that after the glut of profit-taking in the '80s that there was this emerging marketplace for them that they could reinvent and reinvest themselves and make large amounts of profit, and as a result to which we started to see them in the '80s.

As a matter of fact, when I worked in the organized crime task force, I worked under cover as a boutique banker a decade ago doing just exactly this with these type of people. So it's not exactly a new phenomenon, but they've gotten better. They've gone to the Harvard Business School of Crime, educated themselves, and now they've gotten their foot in on Wall Street.

COSSACK: But it's always -- you know, when the mob gets involved, there's always a little violence, too. And there's some allegations here that there was violence and threats to people. Tell us about that.

CASTELLI: Absolutely. You know, their traditional modus operandi is no different than it always has been. You know, they look to corrupt people who may be weak, who are people with a larcenist heart, you know, who need funding. If they can't get it from venture capital sources, what they'll do is they'll look to somebody like a mobster. It's no different than a guy with a gambling problem who goes to a loan shark and borrows the money because he can't get it from the bank.

So as a result of which, people with larcenist hearts, people with drug problems, people who they know that they've worked in the past with, you know, who've invested money for them for laundering purposes or otherwise, they have partnered up with, become the silent partners of, and as a result of which have gotten a foothold into some of these smaller industries. And especially into smaller, less valued stuff. It wouldn't be dissimilar to dealing with the kind of junk bonds that Michael Milken had dealt with a decade ago.

COSSACK: Jerry Bernstein, you're a former prosecutor in this situation. Tell us the difficulties that you run into in trying to prosecute and -- I guess let's start with -- gather evidence in a case like this?

JERRY BERNSTEIN, FORMER FEDERAL PROSECUTOR: Well, first, it seems to me you're dealing here with a case involving 120 people. I don't know that the government has alleged that there are 120 mobsters as defendants in this case. From what I understand, it's a small minority they even allege are only mobsters, so -- or associated with the Mafia.

So a concern that I would see as a criminal defense lawyer is that the government paints with an awfully broad brush here in associating a lot of people in the industry, in the securities industry, with the so-called "Mafia." So I don't know how much of this is the Sopranos come to life and how much of this is real serious Mafia activity.

COSSACK: Marty Rogers, you were in the organized crime section. The Mafia isn't like the Sopranos, in some ways, are they. They're perhaps a little more serious. How do you go about gathering evidence in this situation?

MARTY ROGERS, FORMER FEDERAL PROSECUTORS: Well, as I understand it, in this case they used a lot of wiretaps. I know in the organized crime cases I was involved in, we used people that were in the Witness Protection Program to help us prosecute that case. But I know they used wiretaps here at that phony shop they had set up, that DMN Corporation, and listened in on them. And it's -- you know, frankly, it's easier to get a wiretap sometimes if you go to the judge -- get approval for a wiretap if you tell the judge it's an LCN, La Cosa Nostra case.

But, you know, it's not really much different than doing any other kind of case from a prosecutor's point of view, or defending it, really, from a defense counsel's point of view. You know, the fact is that, Jerry was just saying, a small percentage of these 120 individuals who were arrested were really Mafia figures, according to the press reports; only about 10 of them, in fact, and that the others were people who allegedly assisted the organized crime figures -- bankers, lawyers, brokerage houses, brokers, you know, securities people.

COSSACK: Gerry Lefcourt, if only 10 of these people are actually suspected of being Mafia people, La Cosa Nostra people, why then is this case sold as a Mafia case?

GERALD LEFCOURT, CRIMINAL DEFENSE ATTORNEY: You know, it's really amazing: I'm listening to Bob here talk about the sort of titillating facts about the mob. I was in the Michael Milken case representing his co-defendant. The allegations in this indictment, which I have in front of me, have nothing to do -- or are not at all alike to so-called junk bonds.

This is an attempt by the same old people to get press by promoting something sexy and titillating known as organized crime. The allegations in this indictment which I have in front of me have 23 people in it. This is the one with the so-called mobsters in it, and it alleges acts which are so typical for the market in this day and age. There's a half-a-dozen indictments that I've been involved with in New York City alone involving allegation precisely like this in the last few years because we're in an era where there are, you know, small companies that start out, make no money, but people have high hopes for them; like, you know, that never made a penny. But people plow money into companies where there's real hope out there.

So there's nothing unusual about the allegations here. What is typical is that every time you get some Italian-Americans who have relatives who may or may not have been associated with mob families, you'll find prosecutors, investigators and the like looking to get a lot of press on this stuff by claiming infiltration. What does he mean by infiltration? Means somebody got a job at a company? That's infiltration?

This is real nonsense. What you're dealing with is stock manipulation that has been alleged for ages in the market.

COSSACK: Bob, I'm going to give you a chance to respond, but we're going to have to take a break first.

Because up next, beside the response of Bob, we're going to talk about the colorful history of organized crime in America, from prostitution to bootleg whiskey during Prohibition, and now Internet offers you cannot refuse. Stay with us.


Unabomber Ted Kaczynski has agreed to sell his Montana property for $7,500. The cabin where Kaczynski lived for more than 20 years was confiscated by the FBI for evidence and is stored in Sacramento.



COSSACK: Good news for our Internet-savvy viewers: you can now watch BURDEN OF PROOF live on the World Wide Web. Just log-on to We now provide a live video feed, Monday through Friday, at 12:30 p.m. Eastern time. And if you miss that live show, the program is available on the site at any time via video-on-demand. You can also interact with our show, and even join our chat room.

Federal investigators made their largest securities crackdown in history this week as 120 people were arrested in New York. From prostitution to illegal liquor sales, America's crime families have a long legacy of illegal activity.

Before I talk about the legacy of the illegal activity, Bob, I want to talk to you a little bit about what Gerry Lefcourt said: the notion that there is a sense of ginning it up, if you will, if you can bring in the Mafia, if you can bring in the mob, you get more publicity and you make the case into something that perhaps it really isn't.

How do you respond to that?

CASTELLI: Well, let me respond to a couple of things that Gerry said. First of all, the analogy to Michael Milken is not that we are dealing with junk bonds or doing what he was doing, but only that we were dealing in lower-valued bonds that were traded on their initial entries into the market. So that's the first one.

Secondarily, let me also say that Gerry referred to the fact that every time somebody with a vowel at the end of their name is involved in this, we paint it with the same broad brush, the Mafia. Well, I've got a vowel at the end of my name, and obviously I would be the last one to do that. What we do find troubling is that we see them emerging into this marketplace because they see new and more exciting areas of profitability.

Does that mean that we paint all the people on Wall Street with the broad brush? absolutely not. They haven't taken over Morgan Stanley or Goldman Sachs or the big trading houses and no one would pretend to say that they do.

But I take issue with Gerry on one thing, I don't say that infiltrating into some of these companies is a matter of just going and applying for a job. I think the younger breed of mobster, the new generation, as it were, that enters the millennium, are better educated, are much wiser and much more savvy when it comes to making money in various different marketplaces that heretofore their fathers hadn't.

On Wall Street, arguably we've always had problems, I mean, the difference now is the fact that we had businessmen who became criminals and now we've got criminals who are learning to become businessmen. But, I mean, I want to hesitate -- I want to hasten to say that we shouldn't paint everybody with the same broad brush down here.

LEFCOURT: Hey Roger, you know, you got an indictment here that says somebody named William, also known as Bill. If it wasn't a so- called mob indictment, you would have his name as William, and the fact that Williams are often called Bills or Jameses are also called Jimmy, you wouldn't have that. But what they are trying to do is suggest, you know, Mafia influence, so everybody has a nickname. Even William is also known as Bill, how absurd.

CASTELLI: You know, it's like calling you Gerry the lawyer; right?

LEFCOURT: Right. COSSACK: You know, Jerry, that -- I must tell you, that's sort of a pretty mild nickname, I mean, you know, known as Bill.


COSSACK: If it was Three-Fingers Bill, maybe now we would be talking about something.

Jerry Bernstein, let me ask you this, in terms of the SEC, that's one of the most regulated industries there is. How do you explain the -- if there is organized crime movement, how do the organized crime people get into the SEC?

BERSTEIN: Well, I don't think it's the -- I don't think the allegation is they are in the SEC.

COSSACK: No, I don't mean the SEC, I mean into the stock market business with the regulations of the SEC.

BERSTEIN: I mean, I think a lot of the industries that organized crime has traditionally been involved in are highly regulated, whether it's labor unions or what have you. So I don't think that that, in and of itself, is all that peculiar.

But I'd like to go back to what Gerry Lefcourt was talking about earlier because, I mean, I agree with him. I think that there is a hysteria that tends to come when an indictment is broad and you start talking about the Mafia.

I mean, you've got 10 alleged Mafia-associated people in this case, and you've got 110 other defendants, and when you've got the U.S. Attorney, another high-level law enforcement -- if you've been holding press conferences and talking about Mafia infiltration of Wall Street and basically raising the blood pressure of the potential jury pool and the public in general, I have a concern about what that does in terms of the rights of the other people, or actually all the defendants, and -- who are involved in this case.

COSSACK: Marty Rogers, in terms what Jerry Bernstein points out, I guess what he is saying is how do you get a fair trial if you start throwing out the word Mafia, people just immediately think the worst. As a former prosecutor, there was benefit to be gotten by using the word Mafia, were there burdens that you sometimes suffered from too?

ROGERS: Not that I can recall. I must say that the folks that I prosecuted who were organized crime figures, were bona fide organized crime figures. I had 11 defendants, they were all bona fide organized crime figures. And we did much voir diring of the jury by the defense and the prosecution. And people do have a very strong reaction, jurors do have a strong reaction to the words organized crime and Mafia. The "Sopranos" and their charm notwithstanding.

So, you know, there -- you know, it does mean something differently -- different from, you know, Wall Street brokers indicted is quite different from Mafia infiltrates Wall Street, in terms of the impact that has on the newspaper-reading public who are going to become the jurors on this case.

COSSACK: Gerry Lefcourt, when push comes to shove, the government's going to have to prove those people that they alleged are organized crime, are really involved in organized crime.

Aren't they going to have to do that?

LEFCOURT: They are.

But you know what is really unfair, having sat through some of these RICO trials as a defense lawyer, is that because there is a racketeering enterprise charge, the government is sometimes permitted by some judges to bring in the history of the mob, to go through how it was formed, and what a crew is, and what a capo is.

And all of this stuff is very terrifying to the average juror, and really will not relate directly to the defendants on trial. They have the so-called experts, FBI agents or, like Bob, people who have worked around the mob for many years, and they come in and give you the general history which has a way of prejudicing these trials.

And that's why I object to it. If somebody manipulated a stock, fine, convict them for doing that, but don't convict him because you put in a lot of prejudicial material into the public's mind and press conferences and into the jury's mind at trial with these so-called experts on the mob.

COSSACK: All right, let's take a break.

Up next, how far-reaching is this crackdown in New York. And what will it mean for the 21st century mobster? Stay with us.


Q: Why did the Illinois Supreme Court overturn the sentence of a man on death row since 1982?

A: The court ruled that his lawyer failed to present important evidence that could have affected the sentence. The inmate had been sentenced to death in 1982 for killing two men.



COSSACK: This week in New York, federal prosecutors charged alleged mobsters with extortion, racketeering and even solicitation of murder in a case focusing on securities fraud. The Wall Street dragnet represents a new trend for the city's organized crime.

Bob, let's go back through organized crime a little bit. Something that I know you have studied. Historically, they have recognized areas where there has been money to be made. But this notion of sort of working their way into maybe through electronically is something new, isn't it? CASTELLI: Actually, quite honestly, the medium is different, the methodology may be different, but it's the same old modus operandi. There is really nothing different here. You know, the mob is profit driven and power driven, they are nonideological, they are in it for the money. And as a result of which, if they see an opportunity emerging, anything in the economy where they can make some money, they will move to get into that.

You know, and a much -- I have to add something to you, also as much as it pains me to agree with Gerry on a lot of thing, one thing I do have to agree with him is this: Any time you charge somebody in a RICO indictment, it has the tendency to paint someone with the same broad brush of being a racketeer. Certainly, when you look at the number of people in this indictment, they are not, not only made members of organized crime, but most of them are not even associates of organized crime.

What troubles me, though, is the fact that we have seen this, and I have seen it personally as an investigator, with the trend of organized crime, working their way into areas in Wall Street, where there is profitability to be made.

So I am in agreement with Gerry in painting them with the same broad brush, but I am not entirely in agreement with him in the fact that it is not a troubling phenomenon, and we haven't seen more of it coming, and we probably will see more of it coming in the future.

LEFCOURT: Well, Roger, what most people don't even know, as we sit here, they say 120 people, mob infiltrating Wall Street, is that only one of the indictments charges any alleged organized crime, and that involves 23 people. Many of them are not in that one indictment alleged to be members of organized crime.

What about the other hundred? They have nothing to do with organized crime. But did you hear that from the United States attorney? Did you learn that from the press conference? They are charged in small, little case, many others, many having nothing whatsoever to do with this. But the feeling that one gets from reading the newspapers about that press conference is: Oh, my God, all of organized crime has taken over Wall Street, and there are 120 people involved in that. That is crazy and it's not true.

COSSACK: Marty, Barry Mawn, the assistant FBI director of new York, said: This is example of La Cosa Nostra's efforts to infiltrate the securities market. Doesn't this sort of play into what Gerry Lefcourt is claiming, that in fact this is an overstatement of what's really happening?

ROGERS: Well, it certainly could be an overstatement and it certainly does frighten people, not just prospective jurors in this case, but you know investors, it frightens investors, if they take it for what that FBI agent said, if they take him at his word, that the mob has infiltrated Wall Street.

But the mob, as they said earlier, goes where the money is. So they go there because there is quick money to be made, it was drugs, prostitution, gambling, medical waste hauling, trash hauling, whatever makes money, that is where they are.

COSSACK: Jerry Bernstein, is really unfair in the sense of that -- as you gentlemen have pointed out, there are 20 some odd people in here who are alleged to be in the Mafia. Is it really unfair for the press to pick this up as a Mafia case -- excuse me 10 people.

BERNSTEIN: Yes, it has already gone from 10 to 20, so see what has happened? So it will be up to 50 and then 100. I think that, you know, with all due respect to the press, the press is going to go where there is a good story, and the good story, which has essentially been egged on by the U.S. attorney in -- by her press conference is that the Mafia is basically taking over this part of Wall Street. And I think, you know, I agree with Gerry, that's the problem with this trial by press conference. I think it is just unfair.

COSSACK: Let me go back to Bob. Bob, is this unfair? is it really unfair in light of the fact there is an allegations that there are at least 10 that we know of of being alleged to be members of organized crime? is it unfair to be -- for this to be spun this way?

CASTELLI: Well, let me say this to you. I think, in fairness to law enforcement, we have to say: They have no control whatsoever over how the press portrays. Jerry is right, it's very sexy to have the mob involved. But that not withstanding, there are 10 people who are organized crime members or associates involved in this thing, and it would be naive of us to say that this is not an emerging market that they found, that they started to infiltrate.

Are they taking over Wall Street unilaterally? Absolutely not. Just like they haven't taken over every other industry unilaterally. But they find profitability here, and as a result of which, the press has latched on to this, and they have painted it with the same broad brush. So, to a certain extent, I'm in agreement with Jerry, but I also have to say that it is not much to do about nothing. This is real criminality. There are real criminals. They are involved with La Cosa Nostra, traditional organized crime, and I think we need to look at them for what they are.

COSSACK: All right, that's all the time we have for today. Thanks to our guests and thank you for watching.

Texas A&M University will reportedly suspend its traditional pre- game bonfire after a tragic accident last year. Tune-in to "TALKBACK LIVE" today for more developments. That's at 3:00 p.m. Eastern time, noon Pacific.

And we'll be back Monday with another edition of BURDEN OF PROOF. We'll see you then.



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