-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ScQYkEgM8i8M7sLDHiduixQcEJ78nTo/T+xZ19xs5/e0hE9y402h3RZwSCG+PuTQ lYLtN9R9V6kde1yL+iBE2Q== /in/edgar/work/20000726/0000950134-00-005971/0000950134-00-005971.txt : 20000921 0000950134-00-005971.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950134-00-005971 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000614 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN REALTY TRUST INC CENTRAL INDEX KEY: 0000827165 STANDARD INDUSTRIAL CLASSIFICATION: [6510 ] IRS NUMBER: 540697989 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-09948 FILM NUMBER: 679292 BUSINESS ADDRESS: STREET 1: 10670 N CENTRAL EXPRESSWAY STREET 2: STE 300 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 2146924700 MAIL ADDRESS: STREET 1: 10670 N CENTRAL EXPRESSWAY STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75231 8-K 1 e8-k.txt FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 14, 2000 AMERICAN REALTY TRUST, INC. (Exact name of registrant as specified in charter) Georgia 1-9948 54-0697989 (State of other jurisdiction (Commission file number) (IRS employer of incorporation) identification no.) 10670 North Central Expressway Suite 300 Dallas, Texas 75231 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 692-4700 (Former name or former address; if changed since last report) 2 ITEM 5. OTHER EVENTS. On June 14, 2000, the United States Attorney for the Southern District of New York charged 120 defendants with securities fraud and related charges. Included in the indictment were Gene Phillips and A. Cal Rossi of Basic Capital Management, Inc. ("BCM"). BCM is an advisor to and majority shareholder of the Company. Mr. Phillips and Mr. Rossi have each pled not guilty to all charges. The indictment and the press release issued in connection with the indictment are included as exhibits to this Form 8-K. There are no allegations in the indictment of wrongdoing on the part of the Company or BCM. No Series J Preferred Stock referenced in the indictment has ever been sold to any person. Subsequent to the indictment, the Board of Directors of the Company appointed a special committee of independent directors to conduct an inquiry into the matter. The special committee has engaged outside counsel to review the indictment on behalf of the special committee and to make a report to the special committee regarding the findings. On June 16, 2000, the Company received margin calls from numerous margin lenders with respect to its existing margin debt in the total amount of approximately $35 million, which is secured by the Company's equity investments in its affiliates, Income Opportunity Realty Investors, Inc. ("IORI"), Transcontinental Realty Investors, Inc. ("TCI"), and National Realty, L.P. Several margin lenders sold some of the securities owned by the Company to satisfy the margin calls. Approximately 1,243,407 shares of TCI were sold for approximately $6.6 million, reducing the Company's ownership in TCI from approximately 39.3% to approximately 24.8%. Approximately 62,273 shares of IORI were sold for approximately $200,000, reducing the Company's ownership in IORI from approximately 30.9% to approximately 26.8%. The Company has subsequently paid down approximately $15 million of its margin debt and entered into installment payment agreements with the remaining margin lenders with respect to full payment by the Company of the amounts owed pursuant to these margin calls. As of July 20, 2000, the Company's total margin debt has been reduced to approximately $11.8 million. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. 99.1 Indictment 99.2 Press Release of United States Attorney for the Southern District of New York dated June 14, 2000 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN REALTY TRUST, INC. By: /s/ Robert A. Waldman --------------------- Robert A. Waldman Secretary July 26, 2000 4 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 99.1 Indictment 99.2 Press Release of United States Attorney for the Southern District of New York dated Jun 14, 2000
EX-99.1 2 ex99-1.txt INDICTMENT 1 EXHIBIT 99.1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK - -----------------------------------x UNITED STATES OF AMERICA, : INDICTMENT -v- : 00 Cr. ( ) ROBERT A. LINO, : a/k/a "Little Robert," JAMES S. LABATE, : a/k/a "Jimmy," FRANK A. PERSICO, : a/k/a "Frankie," ANTHONY P. STROPOLI, : SALVATORE R. PIAZZA, a/k/a "Sal," : STEPHEN E. GARDELL, CARY F. CIMINO, : SEBASTIAN RAMETTA a/k/a "Sebbie," : JAMES F. CHICKARA, RALPH DEMATTEO, : a/k/a "Ralphie," ROBERT P. GALLO, : a/k/a "Bobby," MICHAEL T. GRECCO, : JOHN M. BLACK, JR., ANGELO CALVELLO, : a/k/a "Tony," JOSEPH A. MANN, : a/k/a "Andy," WILLIAM M. STEPHENS, : a/k/a "Bill," GLENN B. LAKEN, : GENE PHILLIPS, A. CAL ROSSI, : VINCENT G. LANGELLA, a/k/a "Vinny," : WILLIAM F. PALLA, TODD M NEJAIME, and : STEVEN J. DAPUZZO, : Defendants. - -----------------------------------x 2 RACKETEERING CHARGES COUNT ONE Racketeering The Grand Jury charges: The Enterprise At all times relevant to this Indictment, in the Southern District of New York and elsewhere: 1. DMN Capital Investments, Inc. ("DMN Capital"), held itself out as a financial advisory firm that provided investment banking and stock promotion services. DMN Capital first maintained an office at 67 Liberty Street in New York, New York and later established its office at 5 Hanover Square, New York, New York. 2. ROBERT A LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," FRANK A PERSICO, a/k/a "Frankie," ANTHONY P. STROPOLI, SALVATORE R. PIAZZA, a/k/a "Sal," STEPHEN E. GARDELL, CARY F. CIMINO, SEBASTIAN RAMETTA, a/k/a "Sebbie," JAMES F. CHICKARA, ROBERT P. GALLO, a/k/a "Bobby," MICHAEL T. GRECCO, JOHN M. BLACK, JR., ANGELO CALVELLO, a/k/a "Tony," JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, VINCENT G. LANGELLA, a/k/a "Vinny," WILLIAM F. PALLA, and TODD M. NEJAIME, the defendants, and others known and unknown, and DMN Capital, were members and associates of a criminal organization engaged in securities 2 3 fraud, wire fraud, pension fund fraud, illegal kickbacks to union officials, extortion, money laundering, bribery, witness tampering and murder solicitation. 3. The organization, including its leadership, its membership, and its associates, constituted an "enterprise," as that term is defined in Title 18, United States Code, Section 1961(4), that is, a group of individuals and entity, DMN Capital, associated in fact, although not a legal entity. At various times relevant to this Indictment, the enterprise operated in the Southern and Eastern Districts of New York, the District of New Jersey, the Northern District of Illinois, the Northern District of Texas, the Northern District of California, among other locations in the United States and abroad. At all times relevant to this Indictment, the enterprise was engaged in, and its activities affected, interstate and foreign commerce. 4. The enterprise charged in this Indictment consisted of individuals, a number of whom were members and associates were members and associates of Organized Crime Families of La Cosa Nostra ("LCN Families") in the New York City area, namely the Bonanno Crime Family, the Colombo Crime Family, the Gambino Crime Family, the Genovese Crime Family, and the Luchese Crime Family, associated together with DMN Capital to engage in criminal activities. 3 4 5. The enterprise used its affiliation with various LCN Families to further the illegal goals of the enterprise. The members and associates of the enterprise charged in this Indictment were united by their common criminal interests, regardless of the particular LCN Family, if any, with which a particular individual was associated. Purposes of the Enterprise 6. The purposes of the enterprise included the following: a. Enriching the members and associates of the enterprise through, among other things, securities fraud, wire fraud, and extortion; b. Concealing and promoting the enterprise's unlawful activity by laundering the proceeds of securities fraud and wire fraud; and c. Preserving, protecting, and augmenting the power and financial profits of the enterprise through the use of intimidation, threats of violence, actual violence, intimidation, bribery of public officials, obstruction of justice, witness tampering and murder solicitation. Means and Methods of the Enterprise 7. Among the means and methods employed by the members and associates of the enterprise in the conduct of the enterprise were the following: 4 5 A. Schemes To Defraud Investors In Publicly Traded Securities 8. The enterprise sought and obtained secret control of large blocks of free trading securities of publicly traded companies at little or no cost to the enterprise. The enterprises obtained inexpensive free trading stock by, among other means, systematically exploiting and violating various rules and regulations of the United States Securities and Exchange Commission ("SEC") governing the registration and issuance of securities, and, in certain instances, entering into illegal agreements with persons in control of public companies to violate said SEC rules and regulations for the purpose of conveying inexpensive stock to the enterprise. The enterprise then fraudulently inflated the market prices of these securities through, among other means, (a) engaging in prearranged trades that were fraudulently designed to give the appearance of legitimate market activity; (b) unlawfully stimulating retail demand for securities by paying secret bribes to stock brokers to cause their customers to buy and hold securities; and (c) controlling and attempting to control the available supply of securities. The enterprise then defrauded investors by selling the securities that the enterprise secretly controlled to investors in transactions that had been unlawfully motivated by bribes and that were generally at prices that had been fraudulently inflated by the enterprise. 5 6 9. The following publicly traded companies, among others, entered into corrupt agreements with the enterprise in furtherance of the enterprise's schemes to defraud investors: a. Spaceplex Amusement Centers International Ltd. ("Spaceplex"), a Nevada corporation that maintained its principal place of business in Great Neck, New York. Spaceplex common stock was listed on the OTC Bulletin Board, a regulated quotation service that displayed real-time quotes, last-sale prices, and volume information in over-the-counter ("OTC") securities. b. Reclaim Inc. ("Reclaim"), a Delaware corporation that maintained its principal place of business in Tampa, Florida. Reclaim common stock was listed on the NASDAQ Small Cap market. c. Beachport Entertainment Corp. ("Beachport"), a Utah corporation that maintained its principal place of business in Los Angeles, California. Beachport common stock was listed on the OTC Bulletin Board. d. International Nursing Services Inc. ("International Nursing"), a Colorado corporation that maintained its principal place of business in Denver, Colorado. International Nursing common stock, preferred stock and warrants were listed on the NASDAQ Small Cap market. 6 7 e. Leasing Edge Corporation ("Leasing Edge"), a Delaware corporation that maintained its principal place of business in Las Vegas, Nevada. Leasing Edge common stock and warrants were listed on the NASDAQ Small Cap Market. f. Globus International Resources Corp., ("Globus International"), a Nevada corporation that maintained its principal place of business in New York, New York. Globus International common stock was listed on the OTC Bulletin Board. 10. In addition, the enterprise gained secret control of large blocks of free trading stock of the following issuers and executed schemes of defraud investors: a. Innovative Medical Services, ("Innovative Medical"), a California corporation that maintained its principal place of business in El Cajon, California. Innovative Medical common stock and warrants were listed on the NASDAQ Small Cap market. b. Accessible Software, Inc. ("Accessible Software"), a New Jersey corporation that maintained its principal place of business in Annandale, New Jersey. Accessible Software common stock was listed on the OTC Bulletin Board. 11. The enterprise used DMN Capital to, among other things, negotiate and enter into fraudulent agreements with issuers, maintain secret control of securities, and funnel illegal payments to stock brokers. DMN Capital, both directly 7 8 and indirectly, controlled numerous other entities as well as bank and brokerage accounts for the purpose of achieving the unlawful purposes of the enterprise. 12. To facilitate it schemes to defraud investors in publicly traded securities, the enterprise infiltrated and gained secret control of brokerage firms and branch offices of brokerage firms, including: a. Monitor Investment Group, Inc., a broker-dealer that was registered with the SEC that operated branches at 20 Exchange Place, 919 Third Avenue and 30 Broad Street in New York City. From in or about September 1995 to in or about June 1996, the enterprise operated Monitor's three New York branches as "boiler rooms" and employed a host of manipulative sales practices that facilitated the sale of Beachport, International Nursing, Accessible Software and other securities (the "House Stocks") to unwitting investors. Among other fraudulent sales practices at Monitor, the enterprise, through its members and associates, (i) manipulated the retail sales price of House Stocks on a daily basis; (ii) paid brokers exorbitant commissions based upon excessive "spreads" or "mark-ups" that the enterprise controlled through its domination of the market for the House Stocks; (iii) systematically failed to disclose its fraudulent mark-ups and exorbitant commissions to its customers; (iv) prohibited Monitor's brokers from executing sell orders from 8 9 Monitor's customers on House Stocks; (v) paid secret bribes to select brokers at Monitor; and (vi) employed scores of unlicensed brokers and cold-callers. b. A branch of Meyers Pollack and Robbins, a broker-dealer registered with the SEC, located at 30 Broad Street, New York, New York. From in or about July 1996 to in or about September 1996, the enterprise entered into an agreement with the principal of Meyers Pollack that permitted its former Monitor branch at 30 Broad Street to continue operation as a Meyers Pollack branch. The enterprise used its secret control of the 30 Broad Street branch of Meyers Pollack to, among other things, defraud investors in the securities of Innovative Medical and Leasing Edge. c. Two branches of First Liberty Investment Group, Inc., a broker dealer registered with the SEC, located at 80 Broad Street and 84 William Street in New York, New York. The enterprise also exercised significant control over First Liberty's trading operations. The enterprise used its secret control at First Liberty to facilitate the scheme to defraud investors in Globus International. 13. The enterprise also entered into corrupt deals with brokers at other firms who, in return for secret bribes, agreed to cause their customers to buy and hold (or "put away") securities. These bribes were paid in the form of cash, 9 10 securities, payments to third-party nominees, as well as securities sold in rigged transactions at substantial discounts to the then-prevailing market price. In addition to bribing individual brokers, the enterprise entered into bribery arrangements to "put away" securities with the principals of branches of other firms, as well as with persons who controlled "crews" of brokers acting in concert with respect to a particular security, including the following: a. A crew of brokers at William Scott & Company, a broker-dealer registered with the SEC that was located in Union, New Jersey. This crew of brokers agreed to be bribed to "put away" Reclaim, International Nursing, Leasing Edge, and Innovative Medical securities, among others. b. The principals of the Meyers Pollack branch located at 67 Wall Street who agreed to be bribed to "put away" International Nursing, Leasing Edge, and Innovative Medical securities, among others. c. A crew of brokers at Atlantic General Financial Group, a broker-dealer registered with the SEC that operated a branch at 19 Rector Street, New York, New York. This crew of brokers agreed to be bribed to "put away" Spaceplex and Reclaim and later entered in an agreement with the enterprise to operate Monitor's 20 Exchange Place branch. 10 11 14. In addition to the schemes to defraud investors in Spaceplex, Reclaim, Beachport, International Nursing, Leasing Edge, Innovative Medical, Accessible Software and Globus International securities, all of which featured actual and attempted control and domination of the market for each security, the enterprise periodically sought illegal profits through its participation in, and facilitation of, schemes where the illegal conduct was the paying of bribes to brokers in return for causing their customers to "put away" securities. The securities of the following companies, among others, were the subject of broker bribery schemes that the enterprise facilitated: a. Healthwatch, Inc., a Minnesota corporation, that maintained its principal place of business in Atlanta, Georgia. Healthwatch common stock was listed on the NASDAQ Small Cap market. The enterprise facilitated bribes to brokers at Bell Investment Group, a broker-dealer registered with the SEC located in New York, New York, in return for "putting away" Healthwatch stock. b. GTrade.Network, Inc., ("GTrade"), a Delaware corporation that maintained its principal place of business in Great River, New York. The enterprise facilitated bribes to brokers at Bryn Mawr Investment Group, a broker-dealer registered with the SEC with branch offices in New York, New York Staten Island, New York, in return for "putting away" GTrade stock. 11 12 B. Extortion, Threats and Intimidation 15. The enterprise used extortion, threats and intimidation to further its illegal activities in the public securities markets. The enterprise used its LCN Family backing and affiliation to instill fear in brokers and other market participants who did business with the enterprise. A principal objective was to enforce agreements with brokers to "put away" stock in return for bribes. Brokers who reneged on these agreements were subject to beatings and threats of beatings. The enterprise used extortionate means to seek repayment of bribes from brokers and stock promoters who, contrary to the illegal agreement to keep securities "put away," permitted brokerage firm customers to sell such securities to the market. Another objective was to enforce discipline among brokers who worked in brokerage firms controlled and dominated by the enterprise. Brokers employed at Monitor's 20 Exchange Place branch who failed to push Monitor's House Stocks on Monitor's customers were subjected to intimidation and violence at the hands of members and associates of the enterprise. C. Schemes To Defraud Investors In Private Placements of Securities 16. The enterprise entered into unlawful agreements with companies that sought to sell securities to investors in private placements. Members and associates of the enterprise dominated and controlled each of these companies. The essence of 12 13 these unlawful agreements was that brokers who sold securities in these private placements would be paid secret exorbitant sales commissions of up to 50 percent of the proceeds obtained from investors. The enterprise profited by retaining a portion of these excessive sales commissions for itself. The enterprise also sought to further the control and domination of its members and associates over these companies by assisting in raising capital through fraudulent means. Among other private placements of securities, the enterprise fraudulently sold and agreed to cause the sale of securities issued by the following companies: a. Ranch*1 Inc., a Delaware corporation with its principal place of business in New York, New York. Ranch*1 operated and franchised fast-food restaurants featuring grilled chicken sandwiches throughout New York City area and elsewhere. b. World Gourmet Soups, Inc., d/b/a "The Manhattan Soup Man," ("Manhattan Soup Man"), a Delaware corporation with its principal place of business in New York, New York. Manhattan Soup Man operated and franchised fast food restaurants and kiosks and sold prepared soups to the restaurant industry. c. Jackpot Entertainment Magazine, Inc., ("Jackpot") a New York corporation with its principal place of 13 14 business in Brooklyn, New York. Jackpot published a magazine on the gaming industry. D. The Money Laundering Schemes 17. The enterprise engaged in, and caused other persons and entities to engage in, a variety of financial transactions with the proceeds of its securities fraud schemes that were designed to conceal the fact that funds received from defrauded investors were the proceeds of specified unlawful activity, and to promote continuing schemes to defraud investors. These laundering transactions took the following forms, among others: (a) structured withdrawals of cash from financial institutions; (b) checks drawn on bank accounts in the names of nominees to pay off brokers; (c) wire transfers of funds to bank and brokerage accounts in the names of nominees to pay bribes to brokers; and (d) wire transfers of funds to bank accounts of persons who agreed to return cash to the enterprise in return for a fee. E. The Union Pension Fund Fraud and Kickback Schemes 18. In or about the Fall of 1999, the enterprise expanded its racketeering activity to include schemes to defraud the pension funds of various union locals and to pay illegal kickbacks to union officials. Some of these union locals were influenced by LCN Families, including Production Workers Local 400, which was influenced by the Colombo Crime Family. In 14 15 addition to these union locals, the enterprise also targeted the pension fund of the Detectives' Endowment Association, the labor organization that serves the interests of detectives of the New York City Police Department. 19. To achieve it unlawful objectives, the enterprise devised two fraudulent investments that appeared to be investments suitable for pension funds and that were designed to appear legitimate so as to withstand the scrutiny of honest union officials. These fraudulent investments included: a. A securities offering of American Realty Trust, a publicly traded real estate investment trust that was listed on the New York Stock Exchange under the ticker symbol "ARB." The affairs of American Realty Trust were controlled by Basic Capital Management Inc. ("Basic Capital"), a Dallas, Texas advisory firm that also advised three related real estate investment trusts. Pursuant to the scheme, Basic Capital agreed with the enterprise to cause American Realty Trust to issue a series of preferred stock (the "ARB Series J Preferred Stock"). Basic Capital further agreed with the enterprise that for every $13 million of ARB Series J Preferred Stock sold to institutional buyers, including union pension funds, Basic Capital would cause approximately $2 million of the proceeds to be paid secretly to the enterprise. The enterprise, including members and associates affiliated with Basic Capital, planned to pay off 15 16 corrupt union officials with a portion of its share of the offering proceeds. b. An offering of interests in a hedge fund known as the "TradeVentureFund," which represented itself as having a proprietary trading strategy in securities, commodities, futures, and options as well as stocks that permitted it to significantly out-perform such market benchmarks as the Standard & Poor's 500 Index and the NASDAQ Composite Index. TradeVentureFund also claimed to set aside a portion of its funds under management for venture capital investments in companies. Pursuant to the scheme, TradeVentureFund would churn commodities transactions, thereby generating excessive trading commission expenses, a portion of which would be kicked back to the enterprise. The enterprise in turn planned to pay off corrupt union officials with a portion of its share of the kickback. In addition, TradeVentureFund planned to place a portion of its venture capital funds in fraudulent deals coordinated by members and associates of the enterprise in a manner designed to generate unlawful profits for the enterprise. F. Bribery and Witness Tampering 20. The enterprise sought to impede federal law enforcement scrutiny of its illegal activities, and the illegal activities of members and associates of LCN Families, by obtaining confidential information concerning federal law 16 17 enforcement investigations and disseminating such information to members and associates of the enterprise. This confidential information concerned, among other things, whether members and associates of the enterprise, as well as members and associates of LCN Families, were the subjects of federal grand jury investigations, faced imminent indictment and arrest, and were the subjects of electronic surveillance. The enterprise shared this information with members and associates of LCN Families in the New York City area. 21. The enterprise sought to identify informants and cooperating witnesses whom the enterprise believed had assisted the Federal Bureau of Investigation in its investigations and who agreed to testify in federal criminal trials of members and associates. The enterprise further sought to prevent the attendance and testimony of cooperating witnesses at grand jury proceedings and trials through, among other means, the solicitation of murder. The Defendants 22. At various times relevant to the Indictment, the defendants listed below were members of the enterprise: a. ROBERT A. LINO, a/k/a "Little Robert," the defendant, was a soldier and later a capo in the Bonanno Crime Family. LINO supervised the activities of members and associates of the enterprise. LINO used his membership in the Bonanno Crime 17 18 Family to control the activities of the members and associates of the enterprise and to resolve disputes among the members and associates, as well as disputes between members and associates of the enterprise and others. b. JAMES S. LABATE, a/k/a "Jimmy," the defendant, was an associate of the Gambino Crime Family who had functioned as an associate of the Bonanno Crime Family and had endeavored to become a member of that crime family. LABATE was a partner in the operation of DMN Capital. Among other things, LABATE participated in the enterprise's schemes to defraud, and used threats, intimidation, and extortion to further the interests of the enterprise. c. FRANK A. PERSICO, a/k/a "Frankie," the defendant, was an associate of the Colombo Crime Family. PERSICO was a registered stock broker who headed crews of corrupt brokers at William Scott, First Liberty, and Bryn Mawr. PERSICO participated in the enterprise's schemes to defraud investors in Reclaim, International Nursing, Leasing Edge, Innovative Medical, Globus International, and GTrade, among others. As of in or about June 1999, PERSICO was the Treasurer of Production Workers Local 400 in New York, New York ("Local 400"). PERSICO used his status with the Colombo Crime Family to facilitate the enterprise's plan to defraud Local 400. 18 19 d. ANTHONY P. STROPOLI, the defendant, was an associate of and later a soldier in the Colombo Crime Family. STROPOLI controlled the 30 Broad Street branch of First Liberty and later, together with FRANK PERSICO, the defendant, secretly controlled Bryn Mawr Investment Group branches in Manhattan and on Staten Island. Among other things, STROPOLI participated in the scheme to defraud investors in Globus International and in the enterprise's money laundering activities. e. SALVATORE R. PIAZZA, a/k/a "Sal," the defendant, was an associate of the Bonanno Crime Family, a partner in DMN Capital and an owner of Monitor. Among other things, PIAZZA facilitated the enterprise's secret control of Monitor and coordinated the payment of secret bribes to brokers. f. STEPHEN E. GARDELL, the defendant, was a New York City Police Department ("NYPD") Detective and the Treasurer of the Detectives' Endowment Association ("DEA"). Among other things, GARDELL received bribes in return for providing confidential information concerning federal law enforcement operations to other members and associates of the enterprise, and corruptly agreed to defraud the DEA pension plan for the benefit of the enterprise and for personal profit. g. CARY F. CIMINO, the defendant, was a New York-based stock promoter who, among other things, arranged for secret bribes to scores of corrupt brokers on deals controlled by 19 20 the enterprise, including Spaceplex, Reclaim, Beachport and International Nursing. CIMINO also solicited the murder of a person he believed to be a cooperating witness. h. SEBASTIAN RAMETTA, a/k/a "Sebbie," the defendant, was an associate of the Colombo Crime Family. RAMETTA was the president and chief executive officer of Ranch*1, and controlled stock in Ranch*1 and Manhattan Soup Man securities offerings both to obtain money and to advance the interests of the Colombo Crime Family in these businesses. i. JAMES F. CHICKARA, the defendant, was an associate of the Colombo Crime Family. CHICKARA was the vice chairman of Ranch*1, and controlled stock in Ranch*1 and Manhattan Soup Man. CHICKARA agreed with members and associates of the enterprise to defraud investors in Ranch*1 and Manhattan Soup Man securities offerings both to obtain money and to advance the interests of the Colombo Crime Family in these businesses. j. ROBERT P. GALLO, a/k/a "Bobby," the defendant, was an associate of the Genovese Crime Family who, among other things, assisted members and associates of the enterprise in operating Monitor, recruiting crews of brokers to work on behalf of the enterprise, and facilitating secret cash 20 21 payments to crews of brokers at other brokerage firms, including William Scott and Atlantic General. k. MICHAEL T. GRECCO, the defendant, was an associate of the Colombo Crime Family who, among other things, presented fraudulent deals to the enterprise, assisted members and associates of the enterprise in laundering the proceeds of unlawful activity, and facilitated secret cash payments to brokers. l. JOHN M. BLACK, JR., the defendant, was an associate of the Luchese Crime Family and the principal of Grady and Hatch & Company Inc., a broker-dealer in New York, New York. Among other things, BLACK facilitated the union pension fund schemes by recruiting GLENN B. LAKEN, the defendant, to the enterprise. m. ANGELO CALVELLO, a/k/a "Tony," the defendant, assisted members and associates of the enterprise in recruiting union locals, including Local 137 of the Operating Engineers Union, to participate in fraudulent investment schemes. In addition, CALVELLO agreed to participate in fraudulent private offering of Ranch*1 stock. n. JOSEPH A. MANN, a/k/a "Andy," the defendant, was a stock promoter and investment banker who controlled, among other entities, First Columbus Securities, Ltd., a purported broker-dealer based in Nevis, West Indies, and the International 21 22 Depositary Trust Corp. Among other things, MANN introduced to the enterprise corrupt deals, including Spaceplex, GTrade, and ARB Series J Preferred Stock, assisted in fraudulent promotions and market manipulation, and shared in the unlawful proceeds of securities fraud. o. WILLIAM M. STEPHENS, a/k/a "Bill," the defendant, was the chief investment strategist of Husic Capital Management, an investment adviser based in San Francisco, California. Among other things, STEPHENS agreed to bribe union officials to induce them to place union pension assets under his management and to violate his fiduciary duties to his clients by investing those assets in ARB Series J Preferred Stock and TradeVentureFund. p. GLENN B. LAKEN, the defendant, was the principal manager of the TradeVentureFund. Among other things, LAKEN participated in the union pension fund and kickback schemes by recruiting WILLIAM M. STEPHENS, a/k/a "Bill," the defendant, and agreeing to pay secret bribes to union officials funded through kickbacks from TradeVentureFund. q. GENE PHILLIPS, the defendant, secretly controlled Basic Capital, the adviser to American Realty Trust, Inc., the issuer of the ARB Series J Preferred Stock. PHILLIPS agreed with other members and associates of the enterprise to defraud union pension funds in connection with the sale of ARB 22 23 Series J Preferred Stock. PHILLIPS used his secret control of Basic Capital to order the issuance of ARB Series J Preferred Stock. r. A. CAL ROSSI, the defendant, was the managing director of capital markets for Basic Capital. ROSSI structured the fraudulent ARB Series J Preferred Stock offering with members and associates of the enterprise and agreed that a portion of the offering proceeds would be used to pay secret bribes to union officials. s. VINCENT G. LANGELLA, a/k/a "Vinny," the defendant, was an associate of the Colombo Crime Family. LANGELLA was a registered stock broker at, among other firms, William Scott, First Liberty and Bryn Mawr. Among other things, LANGELLA participated in schemes to defraud investors in International Nursing and GTrade. t. WILLIAM F. PALLA, the defendant, was a principal of Monitor who facilitated the enterprise's secret control of Monitor. Among other things, PALLA supervised the Monitor "boiler room" at 20 Exchange Place in Manhattan and jointly oversaw Monitor's trading activities. u. TODD M. NEJAIME, the defendant, was a stock broker and promoter. Among other things, NEJAIME accepted secret bribes in returning for procuring the sale of millions of dollars 23 24 of stocks fraudulently promoted by the enterprise. NEJAIME also managed Monitor's Third Avenue office in Manhattan. The Racketeering Violation 23. From in or about early 1995 to the present, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," FRANK A. PERSICO, a/k/a "Frankie," ANTHONY P. STROPOLI, SALVATORE R. PIAZZA, a/k/a "Sal," STEPHEN E. GARDELL, CARY F. CIMINO, SEBASTIAN RAMETTA, a/k/a "Sebbie," JAMES F. CHICKARA, ROBERT P. GALLO, a/k/a "Bobby," MICHAEL T. GRECCO, JOHN M. BLACK, JR., ANGELO CALVELLO, a/k/a "Tony," JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, VINCENT G. LANGELLA, a/k/a "Vinny," WILLIAM F. PALLA, and TODD M. NEJAIME, the defendants, and others known and unknown, being persons employed by and associated with the racketeering enterprise described in paragraphs one to twenty-two, which enterprise was engaged in, and the activities of which affected, interstate and foreign commerce, unlawfully, willfully, and knowingly conducted and participated, directly and indirectly, in the conduct of the affairs of that enterprise through a pattern of racketeering activity, that is, through the commission of the following acts of racketeering: 24 25 The Pattern of Racketeering Activity 24. The pattern of racketeering activity, as defined in Title 18, United States Code, Sections 1961(1) and 1961(5), consisted of the following acts: Racketeering Act One Fraud In Connection With The Purchase And Sale of Spaceplex Securities 25. From in or about January 1995, up to and including in or about October 1995, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of 25 26 Spaceplex common stock, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. Racketeering Act Two Fraud In Connection With The Purchase And Sale of Reclaim Securities 26. From in or about May 1995, up to and including in or about September 1995, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 249.10b-5, by (a) employing devices, schemes, and artifice to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Reclaim common stock, in violation of 26 27 Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. Racketeering Act Three Fraud In Connection With The Purchase And Sale of Beachport Securities 27. From in or about August 1995, up to and including in or about May 1996, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Beachport common stock, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. 27 28 Racketeering Act Four Fraud In Connection With The Purchase And Sale of International Nursing Securities 28. From in or about October 1995, up to and including in or about June 1996, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and, instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person in connection with the purchase and sale of International Nursing common stock, preferred stock and warrants, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. 28 29 Racketeering Act Five Fraud In Connection With The Purchase and Sale of Leasing Edge Securities 29. From in or about November 1995, up to and including in or about October 1996, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," and FRANK A. PERSICO, a/k/a/ "Frankie," the defendants, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes; and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Leasing Edge common stock and warrants, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. 29 30 Racketeering Act Six Fraud In Connection With The Purchase And Sale of Accessible Software Securities 30. From in or about December 1995, up to and including in or about May 1996, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," WILLIAM F. PALLA," and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Accessible Software common stock, in violation of Title 15, United State Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. 30 31 Racketeering Act Seven Fraud In Connection With The Purchase And Sale of Globus International Securities 31. From in or about October 1996, up to and including in or about January 1998, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a/, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," and ANTHONY P. STROPOLI, the defendants, and Steven J. Dapuzzo, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Globus International common stock, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. 31 32 Racketeering Act Eight Extortion of a Stock Promoter 32. The defendants named below committed the following acts, any of one which alone constitutes the commission of Racketeering Act Eight: a. Extortion Conspiracy In or about April and May 1995, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," CARY F. CIMINO, and ROBERT P. GALLO, a/k/a "Bobby," the defendants, and others known and unknown, unlawfully, willfully, and knowingly combined, conspired, confederated, and agreed together and with each other to commit extortion, as that term is defined in Title 18, United States Code, Section 1951(b)(2), by taking money and property, namely, a $40,000 debt owed by a stock promotor to CARY F. CIMINO, the defendant, from and with the consent of the stock promoter, which consent was induced by the wrongful use of actual and threatened force, violence, and fear, and thereby would and did obstruct, delay, and affect commerce, and the movement of articles and commodities in commerce, as that term is defined in Title 18, United States Code, Section 1951(b)(3), in violation of Title 18, United States Code, Section 1951. 32 33 b. Attempted Extortion In or about May 1995, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," CARY F. CIMINO, and ROBERT P. GALLO, a/k/a "Bobby," the defendants, and others known and unknown, unlawfully, willfully, and knowingly attempted to commit extortion, as that term is defined in Title 18, United States Code, Section 1951(b)(2), by taking and attempting to take money and property, a $40,000 debt owed by a stock promoter to CARY F. CIMINO, from and with the consent of the stock promoter, which consent was induced by the wrongful use of actual and threatened force, violence, and fear, and thereby would obstruct, delay, and affect commerce, and the movement of articles and commodities in commerce, as that term is defined in Title 18, United States Code, Section 1951(b)(3), in violation of Title 18, United States Code, Sections 1951 and 2. c. Extortion Conspiracy In or about April and May 1995, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," CARY F. CIMINO, and ROBERT P. GALLO, a/k/a "Bobby," the defendants, and others known and unknown, unlawfully, willfully, and knowingly, combined, conspired, confederated, and agreed together and with each other to steal the property of another, namely, a sum of money from a stock promoter, by means of extortion, by instilling in the stock promoter a fear that the 33 34 defendants would cause physical injury to some person in the future, in violation of New York State Penal Law. Racketeering Act Nine Money Laundering Conspiracy 33. From in or about January 1995 to in or about October 1996, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," FRANK A. PERSICO, a/k/a "Frankie," SALVATORE R. PIAZZA, a/k/a "Sal," CARY F. CIMINO, ROBERT P. GALLO, a/k/a "Bobby," TODD M. NEJAIME, together with others known and unknown, knowing that the property involved in financial transactions represented the proceeds of some form of unlawful activity, did knowingly and intentionally conspire to conduct such financial transactions affecting interstate and foreign commerce, which transactions in fact involved the proceeds of a specified unlawful activity, namely, securities fraud in connection with purchases and sales of securities issued by Reclaim, Beachport, and International Nursing, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, (a) with the intent to promote the carrying on of said specified unlawful activity, and (b) knowing that the transactions were designed in whole and in part to conceal and disguise the nature, location, source, ownership and control of the proceeds of said specified unlawful activity, all in violation of Title 18, United State Code, Section 1956(h). 34 35 Racketeering Act Ten Money Laundering Conspiracy 34. From in or about December 1999 to the present, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," ANTHONY P. STROPOLI, SALVATORE R. PIAZZA, a/k/a "Sal," MICHAEL T. GRECCO, the defendants, and Ralph Dematteo, together with others known and unknown, knowing that the property involved in financial transactions represented the proceeds of some form of unlawful activity, did knowingly and intentionally conspire to conduct such financial transactions affecting interstate and foreign commerce, which transactions in fact involved the proceeds of a specified unlawful activity, namely, fraud in the sale of securities, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, and wire fraud, in violation of United States Code, Section 1343, (a) with the intent to promote the carrying on of said specified unlawful activity, and (b) knowing that the transactions were designed in whole and in part to conceal and disguise the nature, location, source ownership and control of the proceeds of said specified unlawful activity, all in violation of Title 13, United States Code, Section 1956(h). 35 36 Racketeering Act Eleven Kickback and Wire Fraud Schemes Targeting Production Workers Pension Fund 35. The defendants named below committed the following acts, any one of which alone constitutes the commission of Racketeering Act Eleven: a. Receipt of Illegal Kickbacks From in or about October 1999 to the present, in the Southern District of New York and elsewhere, FRANK A. PERSICO, a/k/a "Frankie" the defendant, being an officer, counsel, agent and employee of an employee organization, namely, Production Workers Local 400, whose members were covered by an employee pension benefit plan subject to title I of the Employee Retirement Income Security Act, namely, the Production Workers Pension Fund, did unlawfully and knowingly receive and agree to receive and solicit fees, kickbacks, commissions, gifts, loans, money and things of value because of and with intent to be influenced with respect to his actions, decisions and other duties relating to questions and matters concerning such plan, namely, the selection of an investment adviser and the investment of plan assets in Series J Preferred Stock and interests in TradeVentureFund, from ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a/ "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL 36 37 ROSSI, in violation of Title 18, United States Code, Sections 1954 and 2. b. Payment of Illegal Kickbacks From in or about October 1999 to the present, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL ROSSI, the defendants, and others known and unknown, unlawfully, and knowingly did give and offer, and promise to give and offer, directly and indirectly, fees, kickbacks, commissions, gifts, loans, money and things of value to FRANK PERSICO, a/k/a "Frankie," who was an officer, counsel, agent, and employee of an employee organization, namely, Production Workers Local 400, whose members were covered by an employee pension benefit plan subject to title I of the Employee Retirement Income Security Act, namely, the Production Workers Pension Fund, because of and with intent to influence FRANK PERSICO's actions, decisions and other duties relating to questions and matters concerning such plan, namely, the selection of an investment adviser and the investment of plan assets in Series J Preferred Stock and interests in TradeVentureFund, in violation of Title 18, United States Code, Sections 1954 and 2. 37 38 c. Wire Fraud From in or about October 1999 to the present, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," FRANK A. PERSICO, a/k/a "Frankie," SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL ROSSI, the defendants, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations and promises, namely, a scheme and artifice to obtain Production Workers Pension Fund assets by fraudulently causing them to be invested in ARB Series J Preferred Stock and interests in TradeVentureFund, transmitted and caused to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, and sounds for the purpose of executing such scheme and artifice, namely, a fax transmission from San Francisco, California to New York, New York on or about March 2, 2000, in violation of Title 18, United States Code, Sections 1343 and 2. Racketeering Act Twelve Scheme to Defraud DEA Annuity Fund 36. From in or about December 1999 to the present, in the Southern District of New York and elsewhere, ROBERT A. LINO, 38 39 a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," STEPHEN E. GARDELL, SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL ROSSI, the defendants, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations and promises, namely, a scheme and artifice to obtain assets of the Annuity Fund of the Detectives' Endowment Association by fraudulently causing them to be invested in ARB Series J Preferred Stock and interests in TradeVentureFund, transmitted and caused to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, and sounds for the purpose of executing such scheme and artifice, namely, a fax transmission from San Francisco, California to New York, New York on or about April 13, 2000, in violation of Title 18, United States Code, Sections 1343 and 2. Racketeering Act Thirteen Kickback and Wire Fraud Schemes Targeting Local 137 Pension Plan 37. The defendants named below committed the following acts, any one of which alone constitutes the commission of Racketeering Act Thirteen: 39 40 a. Payment of Illegal Kickbacks From on or about April 5, 2000 to the present, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ANGELO CALVELLO, a/k/a "Tony," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL ROSSI, and the defendants, and others known and unknown, unlawfully and knowingly did give and offer, and promise to give and offer, directly and indirectly, fees, kickbacks, commissions, gifts, loans, money and things of value to persons who were officers, counsel, agents, and employees of an employee organization, namely, officers of the International Union of Operating Engineers Local 137 located in Briarcliff Manor, New York, whose members were covered by an employee pension benefit plan subject to title I of the Employee Retirement Income Security Act, namely, the pension plans of IUOE Local 137 137A 137B 137C 137R AFL-CIO, because of and with intent to influence their actions, decisions and other duties relating to questions and matters concerning such plan, namely, the selection of an investment adviser and the investment of plan assets in Series J Preferred Stock and interests in TradeVentureFund, in violation of Title 18, United States Code, Sections 1954 and 2. 40 41 b. Wire Fraud From on or about April 5, 2000 to the present, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ANGELO CALVELLO, a/k/a "Tony," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL ROSSI, the defendants, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations and promises, namely, a scheme and artifice to obtain assets of the pension plans of IUOE Local 137 137A 137B 137C 137R AFL-CIO by fraudulently causing them to be invested in ARB Series J Preferred Stock and interests in the TradeVentureFund, transmitted and caused to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, and sounds for the purpose of executing such scheme and artifice, namely, a telephone call between San Francisco, California to New York, New York on or about April 13, 2000, in violation of Title 18, United States Code, Sections 1343 and 2. 41 42 Racketeering Act Fourteen Fraud In Connection With The Purchase And Sale of GTrade Securities 38. From in or about January 2000 through in or about March 2000, in the Southern District of New York, and elsewhere, ROBERT A. LINO, JAMES S. LABATE, a/k/a, "Jimmy," FRANK A. PERSICO, a/k/a "Frankie," JOSEPH A. MANN, a/k/a "Andy," and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulation, Section 240.10b-5, by (a) employing devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of GTrade common stock, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. 42 43 Racketeering Act Fifteen Bribe Receiving 39. From in or about early 1997 through in or about April 2000, in the Southern District of New York and elsewhere, STEPHEN E. GARDELL, the defendant, being a public servant, unlawfully, knowingly, and willfully, did solicit, accept and agree to accept any benefit, namely, cash, property and other things of value, from other persons, namely, JAMES S. LABATE, a/k/a Jimmy, and SALVATORE R. PIAZZA, a/k/a "Sal," the defendants, and others, upon an agreement and understanding that his vote, opinion, judgment, action, decision, and exercise of discretion as a public servant would thereby be influenced, namely, STEPHEN E. GARDELL, the defendant, in return for such cash, property and other things of value, among other things, corruptly leaked information concerning federal law enforcement investigations obtained in his capacity as a NYPD detective to JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," the defendants, and others, in violation of New York State Penal law. Racketeering Act Sixteen Tampering With a Cooperating Witness 40. CARY F. CIMINO, the defendant named below, committed the following acts, any one of which alone constitutes the commission of Racketeering Act Sixteen: 43 44 a. Criminal Solicitation of Murder On or about August 3, 1999, in the Southern District of New York, CARY F. CIMINO, the defendant, unlawfully, willfully, and knowingly, and with intent that another person engage in the murder of a cooperating witness, solicited, requested, commanded, importuned and otherwise attempted to cause such other person to murder said cooperating witness, in violation of New York State Penal Law. b. Witness Tampering On or about August 3, 1999, in the Southern District of New York, CARY F. CIMINO, the defendant, unlawfully, willfully, and knowingly, corruptly persuaded and attempted to persuade another person, with intent to influence, delay, and prevent the testimony of a cooperating witness in an official proceeding and hinder, delay and prevent the communication to law enforcement officer of information relating to the commission and possible commission of a Federal offense, namely, CARY F. CIMINO solicited the murder of a person he believed to be a cooperating witness to prevent his further cooperation and testimony, in violation of Title 18, United States Code, Sections 1512(b) and 2. 44 45 Racketeering Act Seventeen Securities Fraud Conspiracy 41. From in or about December 1999 to the present, in the Southern District of New York and elsewhere, JAMES LABATE, a/k/a "Jimmy," SEBASTIAN RAMETTA, a/k/a "Sebbie," JAMES F. CHICKARA, and ANGELO CALVELLO, a/k/ "Tony," the defendants together with others known and unknown, unlawfully, wilfully, and knowingly did combine, conspire, confederate, and agree together and with each other to commit an offense against the United States, to wit, to commit securities fraud, in violation of Title 15, United States Code, Sections 77q and 77x. 42. It was a part and an object of the conspiracy that JAMES LABATE, a/k/a "Jimmy, "SEBASTIAN RAMETTA, a/k/a "Sebbie," JAMES F. CHICKARA, and ANGELO CALVELLO, a/k/ "Tony," the defendants, and others known and unknown, unlawfully, wilfully, and knowingly, in the offer and sale of securities by the use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, would and did: (a) employ devices, schemes, and artifices to defraud; (b) obtain money and property by means of untrue statements of material fact and omit to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engage in transactions, practices and courses of business 45 46 which operated and would operate as a fraud and deceit upon the purchasers of the common stock of Ranch*1, in violation of Title 15, United States Code, Sections 77q and 77x, all in violation of Title 18, United States Code, Section 371. 43. In furtherance of said conspiracy and to effect the objects thereof, the following overt acts, among others, were committed in the Southern District of New York and elsewhere: a. On or about January 26, 2000, JAMES F. CHICKARA, the defendant, attended a meeting at DMN Capital's office. b. On or about April 11, 2000, ANGELO CALVELLO, a/k/a "Tony," the defendant, met with JAMES S. LABATE, a/k/a "Jimmy," the defendant, and another person at DMN Capital's office. c. On or about April 24, 2000, SEBASTIAN RAMETTA, a/k/a "Sebbie," the defendant, attended a meeting at DMN Capital's office. Racketeering Act Eighteen Fraud In The Offer And Sale of Manhattan Soupman Securities 44. From in or about November 1999 to the present, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," SEBASTIAN RAMETTA, a/k/a "Sebbie," and JAMES F. CHICKARA, the defendants, and others known and unknown, unlawfully, wilfully, and 46 47 knowingly, in the offer and sale of securities by the use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, did: (a) employ devices, schemes, and artifices to defraud; (b) obtain money and property by means of untrue statements of material fact and omit to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engage in transactions, practices and courses of business which operated and would operate as a fraud and deceit upon the purchasers of the common stock of the Manhattan Soup Man, in violation of Title 15, United States Code, Sections 77q and 77x and Title 18, United States Code, Section 2. Racketeering Act Nineteen Fraud In Connection With The Purchase And Sale of Healthwatch Securities 45. From in or about October 1999 through in or about November 1999, in the Southern District of New York and elsewhere JAMES S. LABATE, a/k/a "Jimmy," MICHAEL T. GRECCO, the defendant, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing 47 48 devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Healthwatch common stock, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, United States Code, Section 2. (Title 18, United States Code, Section 1962(c).) COUNT TWO Racketeering Conspiracy The Grand Jury further charges: 46. Paragraphs 1 through 22 and 24 through 45 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 47. From in or about late 1994 to the present, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," FRANK A. PERSICO, a/k/a "Frankie," ANTHONY P. STROPOLI, SALVATORE R. PIAZZA, a/k/a "Sal," STEPHEN E. GARDELL, CARY F. CIMINO, SEBASTIAN RAMETTA, a/k/a "Sebbie," JAMES F. CHICKARA, ROBERT P. GALLO, a/k/a "Bobby," MICHAEL T. GRECCO, JOHN M. BLACK, JR., ANGELO CALVELLO, a/k/a "Tony," JOSEPH A. MANN, a/k/a "Andy," 48 49 WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, VINCENT G. LANGELLA, a/k/a "Vinny," WILLIAM F. PALLA, and TODD M. NEJAIME, the defendants, and others known and unknown, being persons employed by and associated with the racketeering enterprise described in Paragraphs 1 through 22 of this Indictment, namely, an enterprise that was engaged in and the activities of which affected interstate and foreign commerce, unlawfully, willfully, and knowingly combined, conspired, confederated and agreed together and with each other to violate Title 18, United States Code, Section 1962(c), that is, to conduct and participate, directly and indirectly, in the conduct of the affairs of that enterprise through a pattern of racketeering activity, to wit, the racketeering acts set forth in Paragraphs 24 through 45 of this Indictment as Racketeering Acts One through Nineteen. 48. It was a part and an object of the conspiracy that each defendant agreed that a conspirator would commit at least two acts of racketeering in the conduct of the affairs of the enterprise. (Title 18, United States Code, Section 1962(d).) 49 50 COUNT THREE (Conspiracy To Commit Securities Fraud, Wire Fraud, And Commercial Bribery: Spaceplex) The Grand Jury further charges: 49. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. THE CONSPIRACY 50. From in or January 1995 through in or about October 1995, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a, "Sal," JOSEPH A. MANN, a/k/a, "Andy," ROBERT P. GALLO, a/k/a, "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly did combine, conspire, confederate, and agree together and with each other to commit offenses against the United States, to wit, to commit: (a) securities fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Section 240.10b-5; (b) wire fraud, in violation of Title 18, United States Code, Sections 1343 and 1346; and (c) commercial bribery, in violation of Title 18, United States Code, Section 1952(a)(3). 50 51 OBJECTS OF THE CONSPIRACY Fraud in Connection with the Purchase and Sale of Securities 51. It was a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, would and did use and employ, manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Spaceplex securities, all in violation of Title 15, United States Code, Sections 78j(b) and 78ff. Wire Fraud 52. It was further a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. 51 52 LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, having devised a scheme and artifice to defraud, including a scheme and artifice, among other things, to (a) deprive a broker's customer of the intangible right to a broker's honest services, (b) violate a broker's duty to disclose to his customer all material facts concerning securities transactions in the customer's account, and (c) obtain the customer's money and property, would and did transmit and cause to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, pictures and sounds for the purpose of executing such scheme and artifice, all in violation of Title 18, United States Code, Sections 1343 and 1346. Commercial Bribery 53. It was further a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and others known and unknown, unlawfully, willfully, and knowingly, would and did travel in interstate commerce and use facilities in interstate and foreign commerce, with the intent to promote, manage, establish, carry on, and facilitate the promotion, management, 52 53 establishment, and carrying on of unlawful activity, specifically, commercial bribery in violation of New York State Penal Law Sections 180.00 and 180.03, and, thereafter, would and did perform and attempt to perform an act to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of such unlawful activity, all in violation of Title 18, United States Code, Section 1952(a)(3). MEANS AND METHODS 54. Among the means and methods by which ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants and their co-conspirators would and did carry out the conspiracy were the following: a. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, obtained control Spaceplex common stock through a fraudulent securities offering that purportedly complied with SEC Rule 504. b. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, engaged in 53 54 manipulative securities trades for the purpose of fraudulently inflating the market price of Spaceplex common stock. c. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, arranged for the payment of secret bribes to stock brokers who caused their customers to buy and hold Spaceplex common stock. d. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, sold Spaceplex common stock under the control of DMN Capital and related entities at fraudulently inflated prices. OVERT ACTS 55. In furtherance of said conspiracy and to effect the objects thereof, the following overt acts, among others, were committed in the Southern District of New York and elsewhere: a. In or about late 1994, JOSEPH A. MANN, a/k/a "Andy," the defendant, met with two co-conspirators not named as defendants herein, in New York, New York to discuss, among other things, the issuance of Spaceplex stock to DMN Capital and related entities. 54 55 b. On or about April 21, 1995, TODD M. NEJAIME, the defendant, and a co-conspirator not named as a defendant herein caused a Gilford Securities customer to purchase approximately 10,000 shares of Spaceplex common stock. c. On or about April 24, 1995, JAMES A. LABATE, a/k/a, "Jimmy," and SALVATORE R. PIAZZA, a/k/a "Sal," the defendants, and a co-conspirator not named as defendant herein caused DMN Capital to issue a check to CARY F. CIMINO, the defendant. d. On or about July 14, 1995, a co-conspirator not named as a defendant herein caused an Atlantic General customer to purchase approximately 1,000 shares of Spaceplex common stock. (Title 18, United States Code, Section 371). COUNT FOUR (Securities Fraud: Spaceplex) The Grand Jury further charges: 56. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 57. From in or about late 1994 through in or about September 1995, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOSEPH 55 56 A. MANN, a/k/a "Andy," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, directly and indirectly, by use of the means and instrumentalities of interstate commerce and of the mails, did use and employ manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud upon a person, in connection with the purchase and sale of Spaceplex securities. (Title 15, United States Code, Sections 78j(b) and 78ff, Title 17, Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2). COUNT FIVE (Conspiracy to Commit Securities Fraud, Wire Fraud, And Commercial Bribery: Reclaim) The Grand Jury further charges: 58. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 56 57 THE CONSPIRACY 59. From in or May 1995 through in or about September 1995, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly did combine, conspire, confederate, and agree together and with each other to commit offenses against the United States, to wit, to commit: (a) securities fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Section 240.10b-5; (b) wire fraud, in violation of Title 18, United States Code, Sections 1343 and 1346; and (c) commercial bribery, in violation of Title 18, United States Code, Section 1952(a)(3). OBJECTS OF THE CONSPIRACY Fraud in Connection with the Purchase And Sale of Securities 60. It was a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, by the use of 57 58 the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, would and did use and employ, manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes, artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Reclaim securities, all in violation of Title 15, United States Code, Sections 78j(b) and 78ff. Wire Fraud 61. It was further a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, having devised a scheme and artifice to defraud, including a scheme and artifice, among other things, to (a) deprive a broker's customer of the intangible right to a broker's honest services, (b) violate a broker's duty to disclose to his customer 58 59 all material facts concerning securities transactions in the customer's account, and (c) obtain the customer's money and property, would and did transmit and cause to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, pictures and sounds for the purpose of executing such scheme and artifice, all in violation of Title 18, United States Code, Sections 1343 and 1346. Commercial Bribery 62. It was further a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and others known and unknown, unlawfully, willfully, and knowingly, would and did travel in interstate commerce and use facilities in interstate and foreign commerce, with the intent to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of unlawful activity, specifically, commercial bribery in violation of New York State Penal Law Sections 180.00 and 180.03, and, thereafter, would and did perform and attempt to perform an act to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of such unlawful activity, all in violation of Title 18, United States Code, Section 1952(a)(3). 59 60 MEANS AND METHODS 63. Among the means and methods by which ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators would and did carry out the conspiracy were the following: a. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, obtained control of Reclaim common stock through, among other means, fraudulent securities offerings that purportedly complied with SEC Regulation S. b. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, engaged in manipulative securities trades for the purpose of fraudulently inflating the market price of Reclaim common stock. c. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and 60 61 their co-conspirators, arranged for the payment of secret bribes to stock brokers who caused their customers to buy and hold Reclaim common stock. d. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, sold Reclaim common stock under the control of DMN Capital and related entities at fraudulently inflated prices. OVERT ACTS 64. In furtherance of said conspiracy and to effect the objects thereof, the following overt acts, among others, were committed in the Southern District of New York and elsewhere: a. On or about May 16, 1995, TODD M. NEJAIME, the defendant, and a co-conspirator not named as defendant herein caused a Gilford Securities customer to purchase approximately 4,000 shares of Reclaim common stock. b. On or about July 19, 1995, JAMES S. LABATE, a/k/a, "Jimmy," and SALVATORE R. PIAZZA, a/k/a "Sal," the defendants, and a co-conspirator not named as defendant herein caused DMN Capital to issue a check in the name of "Rick Dane." 61 62 c. On or about July 19, 1995, ROBERT P. GALLO, a/k/a "Bobby," the defendant, cashed a DMN Capital check issued in the name of "Rick Dane." d. On or about August 16, 1995, JAMES S. LABATE, a/k/a, "Jimmy," and SALVATORE R. PIAZZA, a/k/a "Sal," the defendants, and a co-conspirator not named as defendant herein caused DMN Capital to issue a check to CARY F. CIMINO, the defendant. (Title 18, United States Code, Section 371). COUNT SIX (Securities Fraud: Reclaim) The Grand Jury further charges: 65. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 66. From in or about May 1995 through in or about September 1995, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully and knowingly, directly and indirectly, by use of the means and instrumentalities of interstate commerce and of the mails, did 62 63 use and employ manipulative and deceptive devices and contrivances in violation of Title 17, code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud upon a person, in connection with the purchase and sale of Reclaim securities. (Title 15, United States Code, Sections 78j(b) and 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2). COUNT SEVEN (Conspiracy To Commit Securities Fraud, Wire Fraud, And Commercial Bribery: Beachport) The Grand Jury further charges: 67. Paragraphs 1 through 22 of this Indictment are repeated, realleged, and incorporated by reference as though fully set forth herein. THE CONSPIRACY 68. From in or September 1995 through in or about May 1996, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, 63 64 the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly did combine, conspire, confederate, and agree together and with each other to commit offenses against the United States, to wit, to commit: (a) securities fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Section 240.I0b-5; (b) wire fraud, in violation of Title 18, United States Code, Sections 1343 and 1346; and (c) commercial bribery, in violation of Title 18, United States Code, Section 1952(a)(3). OBJECTS OF THE CONSPIRACY Fraud In Connection With The Purchase And Sale of Securities 69. It was a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, would and did use and employ, manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state 64 65 material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Beachport securities, all in violation of Title 15, United States Code, Sections 78j(b) and 78ff. Wire Fraud 70. It was further a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, having devised a scheme and artifice to defraud, including a scheme and artifice, among other things, to (a) deprive a broker's customer of the intangible right to a broker's honest services, (b) violate a broker's duty to disclose to his customer all material facts concerning securities transactions in the customer's account, and (c) obtain the customer's money and property, would and did transmit and cause to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, pictures and sounds for the purpose of executing such scheme and artifice, all in violation of Title 18, United States Code, Sections 1343 and 1346. 65 66 Commercial Bribery 71. It was further a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and others known and unknown, unlawfully, willfully, and knowingly, would and did travel in interstate commerce and use facilities in interstate and foreign commerce, with the intent to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of unlawful activity, specifically, commercial bribery in violation of New York State Penal Law Sections 180.00 and 180.03, and, thereafter, would and did perform and attempt to perform an act to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of such unlawful activity, all in violation of Title 18, United States Code, Section 1952(a)(3). MEANS AND METHODS 72. Among the means and methods by which ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators would and did carry out the conspiracy were the following: 66 67 a. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, obtained control of Beachport common stock through, among other means, fraudulent securities offerings that purportedly complied with SEC Rule 504. b. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, engaged in manipulative securities trades for the purpose of fraudulently inflating the market price of Beachport common stock. c. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, arranged for the payment of secret bribes to stock brokers who caused their customers to buy and hold Beachport common stock. d. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, operated three branches of Monitor in New York, New York that 67 68 employed fraudulent and deceptive "boiler rooms" sales practices in connection with sales of Beachport common stock. e. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, and their co-conspirators, sold Beachport common stock under the control of DMN Capital and related entities at fraudulently inflated prices. OVERT ACTS 73. In furtherance of said conspiracy and to effect the objects thereof, the following overt acts, among others, were committed in the Southern District of New York and elsewhere: a. On or about October 11, 1995, TODD M. NEJAIME, the defendant, and a co-conspirator not named as defendant herein caused a Gilford Securities customer to purchase approximately 40,000 shares of Beachport common stock. b. On or about October 31, 1995, a co-conspirator not named as defendant herein caused a Monitor customer to purchase approximately 50,000 shares of Beachport common stock. c. On or about December 7, 1995, JAMES S. LABATE, a/k/a, "Jimmy," and SALVATORE R. PIAZZA, a/k/a "Sal," the defendants, and a co-conspirator not named as defendant herein caused DMN Capital to issue a check to CARY F. CIMINO, the defendant. 68 69 d. On or about May 28, 1996, TODD M. NEJAIME, the defendant, and a co-conspirator not named as defendant herein caused a Monitor customer to purchase approximately 1,100 shares of Beachport common stock. (Title 18, United States Code, Section 371). COUNT EIGHT (Securities Fraud: Beachport) The Grand Jury further charges: 74. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 75. From in or about May 1995 through in or about September 1995, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, CARY F. CIMINO, and TODD M. NEJAIME, the defendants, together with others known and unknown, unlawfully, wilfully and knowingly, directly and indirectly, by use of the means and instrumentalities of interstate commerce and of the mails, did use and employ manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state 69 70 material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud upon a person, in connection with the purchase and sale of Beachport securities. (Title 15, United States Code, Section 78j(b) and 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2). COUNT NINE (Conspiracy To Commit Securities Fraud, Wire Fraud, And Commercial Bribery: International Nursing) The Grand Jury further charges: 76. Paragraphs 1 through 22 of this Indictment are repeated realleged and incorporated by reference as though fully set forth herein. THE CONSPIRACY 77. From in or October 1995 through in or about June 1996, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, did combine, conspire, confederate, and agree together and with each other to commit offenses against the 70 71 United States, to wit, to commit: (a) securities fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and Title 17, Code of Federal Regulations, Section 240.10b-5; (b) wire fraud, in violation of Title 18, United States Code, Sections 1343 and 1346; and (c) commercial bribery, in violation of Title 18, United States Code, Section 1952(a)(3). OBJECTS OF THE CONSPIRACY Fraud in Connection with the Purchase And Sale of Securities 78. It was a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, would and did use and employ, manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5 by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of 71 72 business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of International Nursing securities, all in violation of Title 15, United States Code, Sections 78j(b) and 78ff. Wire Fraud 79. It was further a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, having devised a scheme and artifice to defraud, including a scheme and artifice, among other things, to (a) deprive a broker's customer of the intangible right to a broker's honest services, (b) violate a broker's duty to disclose to his customer all material facts concerning securities transactions in the customer's account, and (c) obtain the customer's money and property, would and did transmit and cause to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, pictures and sounds for the purpose of executing such scheme and artifice, all in violation of Title 18, United States Code, Sections 1343 and 1346. 72 73 Commercial Bribery 80. It was further a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, and others known and unknown, unlawfully, willfully, and knowingly, would and did travel in interstate commerce and use facilities in interstate and foreign commerce, with the intent to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of unlawful activity, specifically, commercial bribery in violation of New York State Penal Law Sections 180.00 and 180.03, and, thereafter, would and did perform and attempt to perform an act to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of such unlawful activity, all in violation of Title 16, United States Code, Section 1952(a)(3). MEANS AND METHODS 81. Among the means and methods by which ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the 73 74 defendants, and their co-conspirators would and did carry out the conspiracy were the following: a. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, and their co-conspirators, obtained control of International Nursing securities, including common stock, preferred stock and warrants, through, among other means, fraudulent securities offerings that purportedly complied with SEC Regulation S. b. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, engaged in manipulative securities trades for the purpose of fraudulently inflating the market price of International Nursing securities. c. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, and their co-conspirators, arranged for the payment of secret bribes to stock 74 75 broker who caused their customers to buy and hold International Nursing securities. d. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," "ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a " Vinny," the defendants, and their co-conspirators, operated three branches of Monitor in New York, New York that employed fraudulent and deceptive "boiler rooms" sales practices in connection with sales of International Nursing securities. e. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENTE G. LANGELLA, a/k/a "Vinny," the defendants, and their co-conspirators, sold International Nursing common stock under the control of DMN Capital and related entities at fraudulently inflated prices. OVERT ACTS 82. In furtherance of said conspiracy and to effect the objects thereof, the following overt acts, among others, were committed in the Southern District of New York and elsewhere: 75 76 a. On or about December 1, 1995, TODD M. NEJAIME, the defendant, and a co-conspirator not named as defendant herein caused a Monitor customer to purchase approximately 2,000 shares of International Nursing common stock. b. On or about October 31, 1995, a co-conspirator not named as defendant herein caused a Monitor customer to purchase approximately 50,000 shares of International Nursing common stock. c. On or about January 4, 1996, two co-conspirators not named as defendants herein caused a Monitor customer to purchase approximately 100,000 International Nursing warrants. d. On or about December 29, 1995, JAMES S. LABATE, a/k/a, "Jimmy,", SALVATORE R. PIAZZA, a/k/a "Sal," the defendant, and a co-conspirator not named as defendant herein caused DMN Capital to issue a check in the name of "Rick Dane." e. On or about December 29, 1995, ROBERT P. GALLO, a/k/a "Bobby," the defendant, cashed a DMN Capital check issued in the name of "Rick Dane." f. On or about December 29, 1995, ROBERT P. GALLO, a/k/a "Bobby," the defendant, provided a quantity of cash to FRANK A. PERSICO, a/k/a "Frankie," the defendant. 76 77 g. On or about January 5, 1996, VINCENT G. LANGELLA, the defendant, caused a William Scott customer to purchase 600 shares of International Nursing common stock. (Title 18, United States Code, Section 371) COUNT TEN (Securities Fraud: International Nursing) The Grand Jury further charges: 83. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 84. From in or about October 1995 through in or about June 1996, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ROBERT P. GALLO, a/k/a "Bobby," WILLIAM F. PALLA, TODD M. NEJAIME, and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, together with others known and unknown, unlawfully, wilfully and knowingly, directly and indirectly, by use of the means and instrumentalities of interstate commerce and of the mails, did use and employ manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts 77 78 necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud upon a person, in connection with the purchase and sale of International Nursing securities. (Title 15, United States Code, Sections 78j(b) and 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2). COUNT ELEVEN (Securities Fraud: Globus International) The Grand Jury further charges: 85. Paragraph 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 86. At all times relevant to Count Eleven of this indictment, STEPHEN J. DAPUZZO, the defendant, was a principal of First Liberty Investment Group who arranged for the enterprise described in Count One of this Indictment to control two First Liberty branches in New York, New York. 87. From in or about October 1996, up to and including in or about January 1998, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a, "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," ANTHONY P. STROPOLI, and STEVEN J. DAPUZZO, the defendants, together with 78 79 others known and unknown, unlawfully, wilfully and knowingly, directly and indirectly, by use of the means and instrumentalities of interstate commerce and of the mails, did use and employ manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes, and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud upon a person, in connection with the purchase and sale of Globus International securities. (Title 15, United States Code, Sections 78j(b) and 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2). COUNT TWELVE (Money Laundering Conspiracy) The Grand Jury further charges: 88. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 89. From in or about January 1995 to in or about October 1996, in the Southern District of New York and elsewhere, 79 80 ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," FRANK A. PERSICO, a/k/a "Frankie," SALVATORE R. PIAZZA, a/k/a "Sal," CARY F. CIMINO, ROBERT P. GALLO, a/k/a "Bobby," and TODD M. NEJAIME, the defendants, together with others known and unknown, knowing that the property involved in financial transactions represented the proceeds of some form of unlawful activity, did knowingly and intentionally conspire to conduct such financial transactions affecting interstate and foreign commerce, which transactions in fact involved the proceeds of a specified unlawful activity, namely, securities fraud in connection with purchases and sales of securities fraud in connection with purchases and sales of securities issued by Reclaim, Beachport, and International Nursing, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, (a) with the intent to promote the carrying on of said specified unlawful activity, and (b) knowing that the transactions were designed in whole and in part to conceal and disguise the nature, location, source, ownership and control of the proceeds of said specified unlawful activity, all in violation of Title 16, United States Code, Section 1956(h). 80 81 COUNT THIRTEEN (Money Laundering Conspiracy) The Grand Jury further charges: 90. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 91. At all times relevant to Count Thirteen of this Indictment, RALPH DEMATTEO, a/k/a "Ralphie," the defendant, was an associate of the Colombo Crime Family who, among other things, laundered proceeds of securities fraud for members and associates of the enterprise described in Count One of this Indictment and others. 92. From in or about December 1999 to the present, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," ANTHONY P. STROPOLI, SALVATORE R. PIAZZA, a/k/a "Sal," MICHAEL T. GRECCO, and RALPH DEMATTEO, a/k/a "Ralphie," the defendants, together with others known and unknown, knowing that the property involved in financial transactions represented the proceeds of some form of unlawful activity, did knowingly and intentionally conspire to conduct such financial transactions affecting interstate and foreign commerce, which transactions in fact involved the proceeds of a specified unlawful activity, namely, fraud in the sale of securities, in violation of Title 15, United States Code, Sections 78j(b) and 78ff and Title 18, 81 82 and wire fraud, in violation of United States Code, Section 1343, (a) with the intent to promote the carrying on of said specified unlawful activity, and (b) knowing that the transactions were designed in whole and in part to conceal and disguise the nature, location, source, ownership and control of the proceeds of said specified unlawful activity. (Title 18, United States Code, Section 1956(h)). COUNT FOURTEEN (Union Pension Fund Fraud and Kickback Conspiracy) The Grand Jury further charges: 93. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. THE CONSPIRACY 94. From in or October 1999 through the present, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," STEPHEN E. GARDELL, JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly did combine, conspire, confederate, and agree together and with each other to commit offenses against the 82 83 United States, to wit, to (a) commit wire fraud, in violation of Title 18, United States Code, Sections 1343 and 1346; (b) receive unlawful kickbacks with respect to the operations of employee benefit plans, in violation of Title 18, United States Code, Section 1954; and (c) pay unlawful kickbacks with respect to the operations of employee benefit plans, in violation of Title 18, United States Code, Section 1954; and (d) commit fraud by an investment adviser, in violation of Title 15, United States Code, Section 80b-6. OBJECTS OF THE CONSPIRACY Wire Fraud 95. It was a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," STEPHEN E. GARDELL, JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, together with others known and unknown, unlawfully, wilfully, and knowingly, having devised a scheme and artifice to defraud and for obtaining money and property by means of false and fraudulent pretenses, and to deprive others of their intangible right to the honest services of officials of labor organizations, would and did transmit and cause to be transmitted by means of wire communication in interstate and foreign 83 84 commerce, writings, signs, signals, pictures and sounds for the purpose of executing such scheme and artifice, all in violation of Title 18, United States Code, Sections 1343 and 1346. Receipt of Illegal Kickbacks 96. It was a part and an object of the conspiracy that FRANK A. PERSICO, a/k/a "Frankie," the defendant, and others known and unknown, unlawfully and knowingly, being trustees of employee pension benefit plans and officers, counsel, agents, and employees of employee organizations whose members were covered by employee pension benefit plans, would and did receive and agree to receive and solicit fees, kickbacks, commissions, gifts, loans, money and things of value because of and with intent to be influenced with respect to their actions, decisions and other duties relating to questions and matters concerning such plans from ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, in violation of Title 18, United States Code, Section 1954. Payment of Illegal Kickbacks 97. It was a part and an object of the conspiracy that ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a/ "Sal," JOHN M. BLACK, JR., 84 85 JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, and others known and unknown, unlawfully and knowingly did give, offer, and promise to give and offer, directly and indirectly, fees, kickbacks, commissions, gifts, loans, money and things of value to trustees of employee pension benefit plans and officers, counsel, agents, and employees of employee organizations whose members were covered by employee pension benefit plans, including FRANK PERSICO, a/k/a "Frankie," and others, because of and with intent to influence their actions, decisions and other duties relating to questions and matters concerning employee pension benefit plans, in violation of Title 18, United States Code, Sections 1954. Fraud By An Investment Adviser 98. It was a part and an object of conspiracy that WILLIAM M. STEPHENS, the defendant, an investment adviser, unlawfully, wilfully and knowingly would and did, by the use of the means and instrumentalities of interstate commerce, directly and indirectly, (a) employ a device, scheme, and artifice to defraud the clients of an investment adviser (b) engage in transactions, practices, and courses of business which operated as a fraud and deceit upon the clients of an investment adviser, namely, Husic Capital Management and (c) engage in acts, practices, and courses of business which were fraudulent and 85 86 deceptive, in violation of Title 15, United States Code, Sections 80b-6 and 80b-17. MEANS AND METHODS 99. Among the means and methods by which ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," STEPHEN E. GARDELL, JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, and their co-conspirators would and did carry out the conspiracy were the following: a. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," STEPHEN E. GARDELL, JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, and their co-conspirators, devised fraudulent investment products, including ARB Series J Preferred Stock and the TradeVentureFund, that appeared to be suitable investments for union pension funds. b. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," STEPHEN E. GARDELL, JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a 86 87 "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, and their co-conspirators, entered into corrupt agreements with union officials pursuant to which such officials, in return for kickbacks, would cause their pension plans to retain a corrupt investment adviser. c. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," STEPHEN E. GARDELL, JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, and their coconspirators, planned to cause the corrupt investment adviser, in violation of his fiduciary duties to his clients, to invest a portion of the union pension assets placed under management in ARB Series J Preferred Stock and interests in the TradeVentureFund. d. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," STEPHEN E. GARDELL, JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CALL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, and their co-conspirators, planned to secretly pay themselves 20% of the face value of all pension fund investments in ARB 87 88 Series J Preferred and a significant percentage of assets placed in the TradeVentureFund. e. ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," FRANK A. PERSICO, a/k/a "Frankie," STEPHEN E. GARDELL, JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, and ANGELO CALVELLO, a/k/a "Tony," the defendants, and their co-conspirators, planned to use a portion of their illegal profits to pay off union officials and to divide the remainder among themselves. OVERT ACTS 100. In furtherance of said conspiracy and to effect the objects thereof, the following overt acts, among others, were committed in the Southern District of New York and elsewhere: a. On or about October 29, 1999, in the vicinity of DMN Capital's office in lower Manhattan, JAMES S. LABATE, a/k/a "Jimmy," the defendant, met with ROBERT A. LINO, a/k/a "Little Robert," the defendant, and another person, and told them that FRANK A. PERSICO, a/k/a "Frankie," the defendant, controlled at least $20 million in Local 400 pension money. b. On or about January 4, 2000, FRANK A. PERSICO, a/k/a "Frankie," met with JAMES S. LABATE, a/k/a "Jimmy," and SALVATORE R. PIAZZA, the defendants, and another person, at DMN Capital's office in New York, New York. 88 89 c. On or about January 11, 2000, JOSEPH A. MANN, a/k/a "Andy" the defendant, attended at meeting at DMN Capital's office. d. On or about January 20, 2000, A. CAL ROSSI, the defendant, attended at meeting at DMN Capital's office. e. On or about January 31, 2000, GENE PHILLIPS, A. CAL ROSSI, and SALVATORE R. PIAZZA, a/k/a "Sal," the defendants, attended at meeting at DMN Capital's office. f. On or about February 3, 2000, FRANK A. PERSICO, a/k/a "Frankie," the defendant, faxed a copy of Local 400's investment guidelines to DMN Capital's office. g. On or about February 9, 2000, GLENN B. LAKEN and JOHN M. BLACK, JR., the defendants, attended a meeting at DMN Capital's office. h. On February 18, 2000, JAMES S. LABATE, a/k/a "Jimmy," the defendant, met with ROBERT A. LINO, a/k/a "Little Robert," the defendant, and another person at DMN Capital's office. i. On or about March 1, 2000, JOHN J. BLACK, Jr. the defendant, while in DMN Capital's office, participated in a conference call with GLENN B. LAKEN, the defendant. j. On or about March 2, 2000, WILLIAM M. STEPHENS, the defendant, faxed a copy of his resume to DMN Capital's office. 89 90 k. On or about March 22, 2000, WILLIAM M. STEPHENS, GLENN B. LAKEN, JOSEPH A. MANN, a/k/a "Andy," JOHN J. BLACK, SALVATORE R. PIAZZA, a/k/a "Sal" and JAMES S. LABATE, the defendants, and others, attended a dinner meeting at Joseph's Ristorante on Hanover Square in lower Manhattan. l. On or about March 23, 2000, WILLIAM M. STEPHENS, the defendant, conducted presentation for union officials at DMN Capital's office attended by, among others STEPHEN E. GARDELL, the defendant. m. On or about March 24, 2000, A. CAL ROSSI, and JOSEPH A. MANN, a/k/a "Andy," attended meetings at DMN Capital's office. n. On or about April 3, 2000, GENE PHILLIPS and A. CAL ROSSI, the defendant, attended a breakfast meeting at the St. Regis Hotel in New York, New York. o. On or about April 13, 2000, faxed a copy of an airline ticket issued to STEPHEN E. GARDELL for round trip travel from New York to San Francisco to DMN Capital's Office. p. On or about April 14, 2000, STEPHEN E. GARDELL, the defendant, met with JAMES S. LABATE, a/k/a "Jimmy," the defendant, and others, at DMN Capital's Office. q. On or April 19, 2000, STEPHEN E. GARDELL, the defendant, received $1000 in cash at his home in Staten Island, New York. (Title 18, United States Code, Section 371). 90 91 COUNT FIFTEEN (Wire Fraud: Local 400) The Grand Jury further charges: 101. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 102. On or about March 2, 2000, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," FRANK A. PERSICO, a/k/a "Frankie," SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS AND A. CAL ROSSI, the defendants, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations and promises, namely, a scheme and artifice to obtain Production Workers Pension Fund assets by fraudulently causing them to be invested in ARB Series J Preferred Stock and interests in TradeVentureFund, transmitted and caused to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, and sounds for the purpose of executing such scheme and artifice, namely a fax transmission from San Francisco, California to New York, New York. (Title 18, Untied States Code, Sections 1343, 1346, and 2). 91 92 COUNT SIXTEEN (Receipt of Illegal Kickbacks: Local 400) The Grand Jury further charges: 103. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 104. From in or about October 1999 to the present, in the Southern District of New York and elsewhere, FRANK A. PERSICO, a/k/a "Frankie" the defendant, being and officer, counsel, agent, and employee of an employee organization, namely, Production Workers Local 400, whose members are covered by an employee pension benefit plan subject to title I of the Employee Retirement Income Security Act, namely, the Production Workers Pension Fund, did unlawfully and knowingly receive and agree to receive and solicit fees, kickbacks, commissions, gifts, loans, money and things of value because of and with intent to be influenced with respect to his actions, decisions and other duties relating to questions and matters concerning such plan, namely, the selection of an investment adviser and the investment of plan assets in Series J Preferred Stock and interests in TradeVentureFund, from ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. 92 93 STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL ROSSI. (Title 18, United States Code, Sections 1954 and 2). COUNT SEVENTEEN (Payment of Illegal Kickbacks: Local 400) The Grand Jury further charges: 105. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 106. From in or about October 1999 to the present, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS; and A. CAL ROSSI, the defendants, and others known and unknown, unlawfully, willfully and knowingly did directly and indirectly give and offer, and promise to give and offer a fee, kickback, commission, gift, loan, money and thing of value to FRANK PERSICO, a/k/a "Frankie," who was an officer, counsel, agent, and employee of an employee organization any of whose members are covered by an employee pension benefit plan, namely, the Production Workers Pension Fund, because of and with intent to influence with respect to, any of PERSICO's actions, decisions and other duties relating to any question and matter concerning such plan. (Title 18, United States Code, sections 1954 and 2). 93 94 COUNT EIGHTEEN (Wire Fraud: DEA Annuity Fund) The Grand Jury further charges: 107. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 108. On or about April 13, 2000, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," STEPHEN E. GARDELL, SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL ROSSI, the defendants, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations and promises, namely, a scheme and artifice to obtain assets of the Annuity Fund of the Detectives' Endowment Association by fraudulently causing them to be invested in ARB Series J Preferred Stock and interests in TradeVentureFund, transmitted and caused to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, and sounds for the purpose of executing such scheme and artifice, namely a fax transmission from San Francisco, California to New York, New York. (Title 18, United States Code, Sections 1343 and 2). 94 95 COUNT NINETEEN (Theft of Honest Services: DEA) The Grand Jury further charges: 107. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 110. On or about April 24, 2000, in the Southern District of New York and elsewhere, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," STEPHEN E. GARDELL, SALVATORE R. PIAZZA, a/k/a "Sal," JOHN M. BLACK, JR., JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, and A. CAL ROSSI, the defendants, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud, namely, a scheme and artifice to deprive the Detectives' Endowment Association of GARDELL's honest services, transmitted and caused to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, and sounds for the purpose of executing such scheme and artifice, namely, a telephone call in interstate commerce between San Francisco, California and New York, New York. (Title 18, United States Code, Sections 1343, 1346, and 2). 95 96 COUNT TWENTY (Payment of Illegal Kickbacks: Local 137) The Grand Jury further charges: 111. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 112. From on or about April 5, 2000 to the present, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," ANGELO CALVELLO, a/k/a "Tony," JOHN M. BLACK, JR., JOSEPH A MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B LAKEN, GENE PHILLIPS, AND A. CAL ROSSI, and the defendants, and others known and unknown, unlawfully and knowingly did give and offer, and promise to give and offer, directly and indirectly, fees, kickbacks, commissions, gifts, loans, money and things of value to persons who were officers, counsel, agents, and employees of an employee organization, namely, officers of the International Union of Operating Engineers Local 137 located in Briarcliff Manor, New York, whose members were covered by an employee pension benefit plan, namely, the pension plans of IUOE Local 137 137A 137B 137C 137R AFL-CIO, because of and with intent to influence their actions, decisions and other duties relating to questions and matter concerning such plan, namely, the selection of an 96 97 investment adviser and the investment of plan assets in Series J Preferred Stock and interests in TradeVentureFund. (Title 18, United States Code, Sections 1954 and 2). COUNT TWENTY-ONE (Securities Fraud: GTrade) The Grand Jury further charges: 113. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 114. From in or about January 2000 through in or about March 2000, in the Southern District of New York and elsewhere, ROBERT A. LINO, JAMES S. LABATE, a/k/a, "Jimmy," FRANK A. PERSICO, a/k/a "Frankie," JOSEPH A. MANN, a/k/a "Andy," and VINCENT G. LANGELLA, a/k/a "Vinny," the defendants, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, 97 98 practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of GTrade common stock. (Title 15, United States Code, Sections 78j(b) and 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2). COUNT TWENTY-TWO (Theft Of Honest Services: NYPD) The Grand Jury further charges: 115. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. Background 116. From in or about early 1997 to the present, STEPHEN E. GARDELL, the defendant, corruptly exploited his position as a detective in the New York City Police Department by soliciting and receiving cash, property, and other things of value in return for (a) communicating confidential law enforcement information concerning organized crime investigations to, among others, JAMES S. LABATE, a/k/a "Jimmy," an associate of the Gambino Crime Family and a member of the enterprise described in Count One of this Indictment; (b) facilitating and attempting to facilitate the issuance of New York City Police Department pistol "carry" permits for LABATE, and SALVATORE R. PIAZZA, a/k/a "Sal," among others, and (c) influencing the outcome of an 98 99 official NYPD investigation into MICHAEL T. GRECCO, the defendant, a member of the enterprise described in Count One of this Indictment; and (d) providing LABATE, PIAZZA and others such benefits as valid New York City law enforcement parking permits. 117. In addition to cash, the other things of value that STEPHEN E. GARDELL, the defendant, corruptly received in return for providing the information, services and items described in the preceding paragraph, included, but were not limited to, the following: a. At least $8,000 in money orders made payable to the contractor that built a swimming pool in GARDELL's backyard; b. Free and substantially discounted rooms and meals (commonly referred to as "comps") at casino hotels in Las Vegas, Nevada and Atlantic City, New Jersey; and c. A fur coat. Statutory Allegation 118. On or about December 1, 1999, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," STEPHEN E. GARDELL, and SALVATORE R. PIAZZA, a/k/a "Sal," the defendants, unlawfully, willfully, and knowingly, having devised and intending to devise a scheme and artifice to defraud, namely, a scheme and artifice to deprive the New York City Police Department of GARDELL's honest services, transmitted 99 100 and caused to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, and sounds for the purpose of executing such scheme and artifice, namely, a telephone call in interstate commerce between Las Vegas, Nevada and New York, New York. (Title 18, United States Code, Sections 1343, 1346, and 2). COUNT TWENTY-THREE (Witness Tampering) The Grand Jury further charges: 119. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 120. On or about August 3, 1999, in the Southern District of New York, CARY F. CIMINO, the defendant, unlawfully, willfully, and knowingly, corruptly persuaded and attempted to persuade another person, with intent to influence, delay, and prevent the testimony of a cooperating witness in an official proceeding and hinder, delay and prevent the communication to a law enforcement officer of information relating to the commission and possible commission of a Federal offense, namely, CARY F. CIMINO, the defendant, solicited the murder of a person he believed to be a cooperating witness to prevent his further cooperation and testimony. (Title 18, United States Code, Sections 1512(b) and 2). 100 101 COUNT TWENTY-FOUR (Securities Fraud: Ranch*1) The Grand Jury further charges: 121. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 122. From in or about December 1999 to the present, in the Southern District of New York and elsewhere, JAMES LABATE, a/k/a "Jimmy," SEBASTIAN RAMETTA, a/k/a "Sebbie," JAMES F. CHICKARA, and ANGELO CALVELLO, a/k/a "Tony," the dependants, and others known and unknown, unlawfully, wilfully, and knowingly, in the offer and sale of Ranch*1 securities by the use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, did: (a) employ devices, schemes, and artifices to defraud; (b) obtain money and property by means of untrue statements of material fact and omit to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engage in transactions, practices and courses of business which operated and would operate as a fraud and deceit upon the purchasers of the common stock of Ranch*1. (Title 15, United States Code, Sections 77q and 77x; and Title 18, United States Code, Section 2.) 101 102 COUNT TWENTY-FIVE (Securities Fraud: Manhattan Soup Man) The Grand Jury further charges: 123. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 124. From in or about November 1999 to the present, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," SALVATORE R. PIAZZA, a/k/a "Sal," SEBASTIAN RAMETTA, a/k/a "Sebbie," and JAMES F. CHICKARA, the defendants, and others known and unknown, unlawfully, wilfully, and knowingly, in the offer and sale of Manhattan Soup Man securities by the use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, directly and indirectly, did: (a) employ devices, schemes, and artifices to defraud; (b) obtain money and property by means of untrue statements of material fact and omit to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engage in transactions, practices and courses of business which operated and would operate as a fraud and deceit upon the purchasers of Manhattan Soup Man common stock. (Title 15, United States Code, Sections 77q and 77x; and Title 18, United States Code, Section 2.) 102 103 COUNT TWENTY-SIX (Securities Fraud: Healthwatch) The Grand Jury further charges: 125. Paragraphs 1 through 22 of this Indictment are repeated, realleged and incorporated by reference as though fully set forth herein. 126. From in or about October 1999 through in or about November 1999, in the Southern District of New York and elsewhere, JAMES S. LABATE, a/k/a "Jimmy," and MICHAEL T. GRECCO, the defendant, together with others known and unknown, unlawfully, willfully, and knowingly, by the use of the means and instrumentalities of interstate commerce and of the mails, directly and indirectly, used and employed manipulative and deceptive devices and contrivances in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes, and artifices to defraud, (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (c) engaging in acts, practices, and courses of business which operated and would operate as a fraud and deceit upon a person, in connection with the purchase and sale of Healthwatch common stock. (Title 15, United States Code, Sections 78j(b) and 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2). 103 104 FORFEITURE ALLEGATION 127. The allegations contained in Counts One and Two of this Indictment are hereby realleged and incorporated by reference for the purpose of alleging forfeiture pursuant to the provisions of Title 18, United States Code, Section 1963. 128. Through the aforesaid pattern of racketeering activity, ROBERT A. LINO, a/k/a "Little Robert," JAMES S. LABATE, a/k/a "Jimmy," FRANK A. PERSICO, a/k/a "Frankie, "ANTHONY P. STROPOLI, SALVATORE R. PIAZZA, a/k/a "Sal," STEPHEN E. GARDELL, CARY F. CIMINO, SEBASTIAN RAMETTA, a/k/a "Sebbie," JAMES F. CHICKARA, ROBERT P. GALLO, a/k/a "Bobby," MICHAEL T. GRECCO, JOHN M. BLACK JR., ANGELO CALVELLO, a/k/a "Tony," JOSEPH A. MANN, a/k/a "Andy," WILLIAM M. STEPHENS, a/k/a "Bill," GLENN B. LAKEN, GENE PHILLIPS, A. CAL ROSSI, VINCENT G. LANGELLA, a/k/a "Vinny," WILLIAM F. PALLA, and TODD M. NEJAIME, the defendants, have property constituting, and derived from, proceeds which they obtained, directly and indirectly, from racketeering activity in violation of Title 18, United States Code, Section 1962, thereby making such property, or an amount of cash equivalent thereto, forfeitable to the United States of America pursuant to Title 18, United States Code, Section 1963(a)(3). The intent of the United States of America to forfeit such property includes, but is not 104 105 limited to, at least the sum of $15,000,000 in United States currency, which includes but is not limited to, all right, title and interest of the aforementioned defendants in a. Any and all bank accounts at HSBC in New York, New York in the name of Crabbe Capital Group, Ltd. or Portly Trading Corp.; b. Any and all brokerage accounts at Wall Street Equities, New York, New York in the name of Crabbe Capital Group, Ltd. or SBG Advisors, Ltd.; and c. Any and all brokerage accounts at Dain Rauscher & Co. in New York, New York in the name of Crabbe Capital Group; all of which constitute proceeds obtained from racketeering activity. 129. Said defendants are jointly and severally liable to the United States for these amounts described in the preceding paragraph. Substitute Assets Provision 130. If any of the property described above as being subject to forfeiture, as a result of any act or omission of the defendants-- (a) cannot be located upon the exercise of due diligence; (b) has been transferred or sold to, or deposited with, a third party; 105 106 (C) has been placed beyond the jurisdiction of the court; (d) has been substantially diminished in value; or (e) has been commingled with other property which cannot be divided without difficulty; it is the intention of the United States, pursuant to Title 18, United States Code, Section 1963(m), to seek forfeiture of any other property of the defendants up to the value of the forfeitable property, including, but not limited to, the following property: (i) Any right, title, and interest held by JAMES LABATE, a/k/a "Jimmy," the defendant, in the real property and appurtenances known as 282 South Railroad Street, Staten Island, New York. (ii) Any right, title, and interest held by SALVATORE R. PIAZZA, the defendant, in real property and appurtenances known as 8 Dehart Avenue, Hewitt, New Jersey. (iii) Any right, title, and interest held by FRANK A. PERSICO, a/k/a "Frankie," the defendant, in the real property and appurtenances known as 129 Salamander Court, Staten Island, New York. (iv) Any right, title, and interest held by ANTHONY 106 107 P. STROPOLI, the defendant, in the real property and appurtenances known as 24 Surrey Drive, Old Bridge, New Jersey. (v) Any right, title, and interest held by ROBERT P. GALLO, a/k/a "Bobby," the defendant, in the real property and appurtenances known as 132 Windswept Lane, Freehold, New Jersey. (vi) Any right, title, and interest held by MICHAEL T. GRECCO, the defendant, in the real property and appurtenances known as 28 Maine Avenue, Staten island, New York. (vii) Any right, title, and interest held by VINCENT G. LANGELLA, a/k/a "Vinny," the defendant, in the real property and appurtenances known as 21 Lorraine Loop, Staten Island, New York. (viii) Any right, title, and interest held by WILLIAM F. PALLA, the defendant, in the real property and appurtenances known as 141 Cardiff Lane, Haverford, Pennsylvania. (Title 18, United States Code, Section 1963(a).) /s/ ILLEGIBLE /s/ MARY JO WHITE - ----------------------- ------------------------ FOREPERSON MARY JO WHITE United States Attorney 107 EX-99.2 3 ex99-2.txt PRESS RELEASE DATED JUNE 14, 2000 1 EXHIBIT 99.2 UNITED STATES ATTORNEY SOUTHERN DISTRICT OF NEW YORK - -------------------------------------------------------------------------------- FOR IMMEDIATE RELEASE JUNE 14, 2000 CONTACT: U.S. Attorney's Office Patrick J. Smith Marvin Smilon, Herbert Hadad (212) 637-2409 Public Information Office (212) 637-2600 David C. Esseks (212) 637-2328 Federal Bureau of Investigation Joseph A. Valiquette Christopher J. Clark (212) 384-2715 (212) 637-2205 James M. Margolin (212) 384-2720 Stephanie B. Isser (212) 637-2633 U.S. Securities & Exchange Commission Chris Ullman Mylan L. Denerstein (202) 942-0020 (212) 637-1022 Jason Sabot (212) 637-2398 PRESS RELEASE MARY JO WHITE, the United States Attorney for the Southern District of New York and BARRY W. MAWN, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), joined by RICHARD WALKER, Director of Enforcement of the United States Securities and Exchange Commission ("SEC"), and MARY L. SHAPIRO, the President of NASD Regulation, announced today that 120 defendants, including members and associates of the five Organized Crime Families of La Cosa Nostra in the New York City area, have been charged with securities fraud and related crimes. Sixteen Indictments and seven criminal Complaints unsealed today in -1- 2 Manhattan federal court allege fraud in connection with the publicly traded securities of 19 companies and the private placement of securities of 16 other companies. Included among the defendants are 10 alleged members and associates of organized crime; a former New York Police Department detective; 57 licensed and unlicensed stock brokers; three recruiters of corrupt brokers; 12 stock promoters; 30 officers, directors or other "insiders" of the companies issuing the securities involved in the frauds; two accountants, an attorney; an investment adviser; and a hedge fund manager. According to the charges 21 broker-dealers or other financial adviser firms were either involved in the frauds, or employed stock brokers or other persons who were involved in the fraud. The various schemes resulted in total losses of more than approximately $50 million, and many tens of millions more would have resulted had the schemes been completed. According to Ms. WHITE and Mr. MAWN, this is the largest number of defendants ever arrested at one time on securities fraud-related charges, and one of the largest number ever arrested in a criminal case of any kind. In coordination with today's arrests, search warrants were executed at four locations in New York, one in Dallas, Texas, and one in Salt Lake City, Utah. Twenty-one defendants are charged with participating in a RICO Enterprise consisting of members and associates of the Bonanno and Colombo Organized Crime Families of La Cosa Nostra in the New York City area, that allegedly perpetrated massive securities fraud over a five-year period by forging corrupt alliances with members and associates of the remaining three New York City Organized Crime Families; controlling -2- 3 and infiltrating broker-dealers; conspiring with issuers of securities and individual stock brokers; scheming to defraud union pension plans; and employing tactics of violence, including threats, extortion, physical intimidation, and the solicitation of murder to, further the illegal goals of the RICO Enterprise. The schemers used traditional boiler-room operations and current Internet techniques to carry out their alleged crimes. The racketeering defendants including, among others: ROBERT A. LINO, a/k/a "Little Robert," an alleged capo in the Bonanno Crime Family; FRANK A PERSICO, an alleged associate of the Colombo Crime Family, and a registered stock broker who controlled crews of brokers at various brokerage firms, including First Liberty Investment Group, Inc., William Scott & Company, Inc., and Bryn Mawr Investment Group; ANTHONY P. STROPOLI, an alleged soldier in the Colombo Crime Family who controlled crews of stock brokers; STEPHEN E. GARDELL, who is alleged to have corruptly exploited his positions as a New York City Police Department Detective and Treasurer of the Detectives' Endowment Association ("DEA"); GENE PHILLIPS, who controlled Basic Capital Management, the investment adviser to American Realty Trust, a New York Stock Exchange-listed real estate investment trust, or REIT; and WILLIAM M. STEPHENS, the Chief Investment Strategist of Husic Capital Management, a San Francisco-based investment adviser, who agreed to manage up to $300 million in union pension funds knowing that a portion would be invested in corrupt deals for the purpose of funding kickbacks to members of the RICO Enterprise and corrupt union officials. The RICO Enterprise is alleged to have engineered manipulation schemes in eight publicly traded securities and to have defrauded investors in connection with three private placements of securities, including one by Ranch*1 Inc., a company that operates fast -3- 4 food restaurants in the New York City area and elsewhere. Two officers of Ranch*1, SEBASTIAN RAMETTA and JAMES F. CHICKARA, have been named as defendants in the RICO charges and are alleged to be associates of the Colombo Crime Family. In addition to the racketeering charges, the other Indictments and Complaints unsealed today charge a wide array of stock market schemes designed to fleece the investing public. Sales of stock in private placements are alleged to have been fraudulently rigged for the benefit of insiders and corrupt brokers. The Internet was allegedly used to further the schemes through the fraudulent promotion of stocks on Internet websites, or the use of companies that were touted as Internet or "dot.com" companies in order to induce investors to capitalize on the Internet boom. Today's charges are the result of a highly successful, one-year undercover operation conducted by the FBI's New York Office, in coordination with the SEC and with assistance provided by NASD Regulation, Inc. The undercover investigation involved, among other things, surveillance, the use of undercover purchases of securities, the use of a series of cooperating witnesses who posed as willing participants in ongoing criminal schemes, and the installation of court-authorized eavesdropping devices in the office of DMN Capital Investments, Inc. ("DMN Capital"), a financial adviser firm that held itself out as providing investment banking and stock promotion services. Pursuant to court order, the FBI recorded approximately 1000 hours of conversations occurring in DMN Capital's office between December 1, 1989 and May 4, 2000. Ms. WHITE stated: Today's charges result primarily from the FBI's successful infiltration of a company that served as investment banker to the crooked and the corrupt. -4- 5 By offering its services to anyone and any deal, as long as it was illicit, the company attracted allegedly mobbed-up broker-dealers, top-shelf investment advisers, unscrupulous issuers, unethical lawyers and accountants, and microcap manipulators -- a virtual Who's Who of securities violators. Their tentacles of fraud roached into every corner of the public and private securities markets, and they preyed on their victims using both traditional boiler-room tactics and contemporary Internet-based manipulations. As today's charges show, fraud in the markets will not be tolerated, no matter how big, how organized, or how creative. Mr. MAWN stated: The FBI investigation code named "Upstick" has uncovered a laundry list of stock manipulation schemes by which the defendant brokers took their victims to the cleaners. This investigation uncovered once again La Cosa Nostra's efforts to infiltrate the securities markets. 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. We will continue to investigate securities fraud schemes whether they be the work of typical white collar criminals or of organized crime. Mr. WALKER stated: The securities fraud involved in today's actions is among the most egregious witnessed in recent years. These manipulations of numerous microcap stocks were designed for the sole purpose of stealing investors' hard-earned dollars. The prosecutions announced today rid the vital market for low-priced securities of unscrupulous operators and reaffirm regulators' commitment to keeping this market safe and fair. Ms. SHAPIRO stated: Today's actions by United States Attorney Mary Jo White again demonstrate her commitment to help rid securities markets of manipulative and fraudulent schemes. NASD Regulation previously brought actions against a number of firms and individuals named in the Indictments unsealed today and will continue to work closely with the United States Attorney's Office and other law enforcement and regulatory agencies to insure investor confidence and the integrity of our markets. Certain of the charges are outlined below. RACKETEERING In United States v. Lino, et al., 00 Cr. 632, 21 defendants are charged with being members and associates of a RICO Enterprise consisting of DMN Capital and a "joint -5- 6 venture" among members and associates of the Bonanno and Colombo Crime Families, with the assistance of associates of the other three New York City crime families, as well as others. In addition to LINO, PERSICO, STROPOLI, GARDELL, RAMETTA, CHICKARA, STEPHENS, and PHILLIPS, the other alleged members of the RICO enterprise include: JAMES S. LABATE, a/k/a "Jimmy"; SALVATORE R. PIAZZA, a/k/a "Sal"; CARY F. CIMINO; RALPH DEMATTEO, a/k/a "Ralphie"; ROBERT P. GALLO, a/k/a "Bobby"; MICHAEL GRECCO; JOHN M. BLACK, JR.; ANGELO CALVELLO, a/k/a "Tony"; JOSEPH A. MANN, a/k/a "Andy"; GLENN B. LAKEN; A. CAL ROSSI; VINCENT G. LANGELLA, a/k/a "Vinny", WILLIAM M. PALLA; and TODD NEJAIME. The Lino Indictment charges the defendants with various crimes, including those described below: ---- 1. Manipulation of Publicly Traded Securities: Between 1995 and 1999, members of the RICO Enterprises fraudulently obtained and controlled large blocks of free or substantially-discounted, publicly-traded securities in violation of various SEC rules and regulations. These securities included those issued by: (1) Spaceplex Amusement Centers International Ltd., which operated amusement parks and was located in Great Neck, New York; (2) Reclaim, Inc., which was in the business of recycling roofing shingles and was located in Tampa, Florida; (3) Beachport Entertainment Corp., which was in the business of producing ice skating entertainment and was located in Los Angeles, California; (4) International Nursing Services, Inc., which was in the business of in-home nursing care and was located in Denver, Colorado; (5) Leasing Edge Corporation, which was in the computer leasing business; (6) Globus Int'l Resources -6- 7 Corp., an import-export company; (7) Innovative Medical Services, a manufacturer of waste purification systems; and (8) Accessible Software, Inc., a software developer. The RICO Enterprise is alleged to have secretly controlled or infiltrated various New York City-area brokerage firms, including Monitor Investment Group, Inc., Meyers Pollock and Robbins, First Liberty Investment Group, Inc., William Scott & Company, and Atlantic General Financial Group. The RICO Enterprise then fraudulently engaged in prearranged trades, paid secret bribes to corrupt stock brokers, and used "no net sale" and other "boiler room" tactics, among other devices, to create artificial retail demand for these securities, and then sold their holdings into that inflated demand at considerable profit. Members of the RICO Enterprise, in order to enforce discipline among the brokers allegedly involved in these schemes, and to punish those who reneged on their agreements to sell stock in return for bribes, subjected brokers to beatings, intimidation, and threats. To aid in the fraudulent schemes, CARY F. CIMINO, a New York-based stock promoter, arranged for secret bribes to be paid to corrupt brokers and, in 1999, CIMINO is alleged to have solicited the murder of a person he believed to be a cooperating witness. 2. Union Pension Funds Fraud and Kickback Schemes: From late 1999 to the present, the RICO Enterprise allegedly sought to defraud union pension funds by employing corrupt securities industry professionals to manage union pension funds, and then, with the knowledge and consent of those professionals, structuring investments for those funds in a manner that allowed for a secret diversion of a portion of the funds to members of the RICO Enterprise and to corrupt union officials. One such alleged fraudulent investment was a preferred stock offering of American Realty Trust, a NYSE- -7- 8 listed REIT that trades under the ticker symbol "ARB." The RICO Enterprise allegedly arranged this corrupt deal through GENE PHILLIPS, who controlled Basic Capital Management, Inc., a Dallas, Texas-based financial adviser firm that served as adviser to American Realty Trust, and A. CAL ROSSI, the Managing Director of Capital Markets for Basic Capital. According to the charges, union pension fund assets would be invested in the offering, and $2.0 million of every $10 million invested would be "kicked back" to the RICO Enterprise and corrupt union officials. In order to give an investment in ARB Series J preferred stock an air of legitimacy, and to convince honest union officials to permit such an investment, the Enterprise recruited an allegedly corrupt money manager, WILLIAM M. STEPHENS, the Chief Investment Officer of Husic Capital Management, a San Francisco-based investment adviser, who allegedly agreed to manage up to $300 million in union pension funds knowing that a portion would be invested in this corrupt deal for the purpose of funding kickbacks to members of the RICO Enterprise and corrupt union officials. A second allegedly fraudulent investment deal designed to defraud union pension funds involved TradeVentureFund, a hedge fund that claimed to have a successful proprietary trading strategy, and whose principal manager was GLENN B. LAKEN. Here, kickbacks to the RICO Enterprise and corrupt union officials would allegedly be funded through the payment of excessive trading commissions and LAKEN's plan to invest the union pension funds in high-risk investments. The pension funds targeted in these allegedly corrupt schemes include: the Production Workers Local 400, which is alleged to be influenced by the Colombo Crime Family; the International Union of Operating Engineers Local 137; and the Detectives' -8- 9 Endowment Association ("DEA"), which serves NYPD detectives. Integral to the success of the alleged schemes involving DEA and Local 400 were STEPHEN E. GARDELL and FRANK A. PERSICO, a/k/a "Frankie", the latter of whom was an alleged associate of the Colombo Crime Family who served as the Treasurer of Production Workers Local 400, each of whom is alleged to have agreed to accept illegal kickbacks to corruptly influence decisions at their respective unions. GARDELL is also alleged to have: (a) leaked confidential law enforcement information concerning organized crime investigations to members and associates of organized crime; (b) assisted in securing firearm "carry" permits for members of organized crime; (c) influenced the outcome of an NYPD investigation into the activities of a member of the RICO Enterprise; and (d) provided New York City law enforcement parking permits to members of organized crime. In return, GARDELL is alleged to have received, among other things, cash and property from organized crime figures, including $8,000 toward the building of a swimming pool at his residence, free and substantially-discounted rooms and meals at casinos in Las Vegas and Atlantic City, and a fur coat. 3. Private Placement Fraud: From approximately October 1999 to the June 2000, the RICO Enterprise allegedly sought to defraud investors in the private placement of securities by arranging for the payment of secret exorbitant sales commissions to brokers of up to 50 percent of the proceeds obtained from investors. These fraudulent private placements allegedly included stock of: (a) Ranch*1, a grilled chicken sandwich fast-food chain of restaurants operating throughout the New York City area and elsewhere; (b) World Gourmet Soups, Inc., d/b/a "The Manhattan Soup Man," a company that operates and franchises fast food restaurants and kiosks and sells prepared soups to -9- 10 the restaurant industry; (1) and (c) Jackpot Entertainment Magazine, Inc., a Brooklyn-based company in the business of publishing a magazine about the casino industry. The defendants charged in this scheme include SEBASTIAN RAMETTA, a/k/a "Sebbie," the President and Chief Executive Officer of Ranch*1, both of whom allegedly are associates of the Colombo Crime Family.(2) INDICTMENTS AND COMPLAINTS CHARGING INTERNET-RELATED FRAUD The Indictments and Complaints unsealed today allege various frauds involving the use of Internet-related companies to commit fraud, or the use of the Internet to promote the securities of other companies whose stock was being manipulated. All of these cases arise out of the undercover investigation because the perpetrators sought to use DMN Capital in their illegal schemes. 1. WAMEX Holdings, Inc.: WAMEX Holdings Inc. is a Brooklyn-based corporation purportedly in the business of developing an alternative trading system ("ATS") for securities, and whose common stock trades on the OTC Bulletin Board. In United States v. Cushing, et al., 00 Mag. 1118, the three defendants charged are - -------- (1) In a Complaint unsealed today, United States v. LaBarbara, 00 Mag. 1121, Stephen LaBarbara, a stock broker at The Agean Group, New Jersey broker-dealer, is alleged to have received, from November 1999 to January 2000, secret undisclosed commissions in connection with his sales of stock in the private placement of World Gourmet Soups, Inc. (2) In another Indictment unsealed today, United States v. Trippe, et al., 00 Cr. 588, six other defendants were charged with securities fraud in connection with two private placement offerings by Jackpot Entertainment. Those six defendants are: EDWARD TRIPPE, Jackpot's Chief Financial Officer and Secretary; BRUCE BECKER, Jackpot's President and Publisher; ANDREW ADAMS, Jackpot's Vice President and Chief Executive Officer; SAMUEL WARD, a public accountant; BRYAN MCGUIRE, a registered representative; and PATRICIA OPPITO, a registered representative employed by Wolff Investment Group, Inc. The Indictment alleges that the defendants paid secret undisclosed compensation equal to 50 percent of the funds raised to brokers who sold Jackpot private placement stock to public investors. The Indictment further alleges that WARD falsified Jackpot's financial statements by concealing -10- 11 MITCHELL CUSHING, WAMEX's Chief Executive Officer; RUSSELL CHIMENTI, WAMEX's Chief Administrative Officer; and ROGER DETRANO, a New York-based stock promoter, were charged with conspiracy to commit securities fraud from December 1999 to June 2000. According to the Complaint, the scheme involved the issuance of false press releases stating that ATS would be available by July 4, 2000, misrepresentations in SEC filings regarding the source and nature of funding that WAMEX had obtained, and the payment of secret exorbitant commissions to brokers who sold WAMEX stock to public customers. The price of WAMEX stock increased from approximately $1.12 per share on December 9, 1999, to approximately $19.50 per share on February 28, 2000. As of June 12, 2000, WAMEX had a market capitalization of over $184 million. In connection with today's actions, the SEC imposed a trading halt on WAMEX stock. 2. E-Pawn.com: E-Pawn.com is a Florida-based company that describes itself as "a multifaceted Internet portal, website designer and e-commerce software developer," and whose stock trades on the OTC Bulletin Board. In United States v. Greyling, et al., 00 Cr. 631, three defendants were charged with securities fraud in connection with an alleged scheme, from January 2000 to June 2000, to pay 1.0 million shares of E-Pawn to be used to bribe brokers to create retail demand for E-Pawn stock, and to use Internet sites and bulk e-mail to tout E-Pawn to the public. Charged in this scheme are LESLIE GREYLING, an alleged undisclosed principal of E-Pawn; ELI LIEBOWITZ, the President, Chief Financial Officer and a Director of E-Pawn; and - ---------- the secret commissions, and by issuing unqualified audit opinions that falsely certified that he had examined Jackpot's financial statements in accordance with generally accepted auditing standards. -11- 12 TINA ALEXANDER, a Texas stock promoter. As of June 12, 2000, E-Pawn had a market capitalization of approximately $198 million. In connection with today's actions, the SEC imposed a trading halt on E-Pawn stock. 3. FinancialWeb.com: FinancialWeb.com ("FWEB") is a Florida-based company purportedly in the business of creating and operating, investment-related Internet services, whose stock trades on the OTC Bulletin Board. In United States v. Lake, et al., 00 Cr. 651, it is alleged that, from February 2000 to June 2000, GLENN B. LAKEN, a hedge fund manager and commodities trader on the Chicago Mercantile Exchange, held a large position in FWEB stock, and enlisted others to fraudulently inflate the price of FWEB stock, and to conceal his identity as the seller. To effect this scheme, LAKEN employed the services of DAVID W. BRUNO and ADAM KRIFTCHER, who allegedly controlled a number of Internet websites, including stockregister.com; bullstrategies.com; wallstreetmarquee.com; atthebell.com; and stockplayground.com, which they allegedly used to conduct coordinated Internet promotions of the stock of publicly-traded companies. Also allegedly involved was MICHAEL PORRICELLI, President of Core Financial, LLC, who controlled a number of Internet websites that he allegedly used to conduct coordinated promotions of the stock of publicly-traded companies. These websites included otcbbstockwatch.com; redalert.com; subway.com; americananalyst.com; powerstocks.com and fortuneinvestments.com. LAKEN also allegedly agreed to use the services of LIONEL REIFLER, President of Fortune Investments, Inc., who allegedly offered a fraudulent newsletter program used to generate high trading volume in OTC securities at inflated prices. According to the Indictment, it was agreed that BRUNO, KRIFTCHER and PORRICELLI would feature FWEB on -12- 13 websites that they controlled, would promote FWEB by sending bulk E-mails to their website subscribers, and that BRUNO and KRIFTCHER would prepare and post on their websites promotional materials describing FWEB's business and its common stock. Laken allegedly agreed to pay BRUNO, KRIFTCHER, REIFLER, and PORRICELLI for their promotional efforts with FWEB stock, and to conceal that fact, as well as LAKEN's involvement in those efforts. Also named in the Indictment is PETER J. WORRELL, a stock broker at and principal of Royal Hutton Securities Corp., who is charged with bribing brokers at Royal Hutton to create retail demand for FWEB stock. 4. SearchHispanic.com and Gtrade Network, Inc.: SearchHispanic.com is a Plainview, New York-based company engaged in creating and maintaining an Internet website of interest to persons of Hispanic descent. GTrade Network, Inc. ("GTrade") is a Great River, New York-based company that held itself out as an incubator of Internet-related and e-commerce businesses. GTrade common stock trades on the OTC Bulletin Board, and SearchHispanic.com has common stock that is issued, but has not publicly traded. In United States v. Downing, et al., 00 Cr. 555, three persons were charged with a fraudulent scheme, from March 2000 to June 2000, in which SearchHispanic.com would go public by "reverse merging" into GTrade, a publicly-traded company, and then the defendants allegedly would artificially inflate the price of the common stock of the merged entity. According to the Indictment, JAMES DOWNING, the Chief Executive Officer and controlling shareholder of SearchHispanic.com, met with alleged members and associates of organized crime, including SALVATORE R. PIAZZA, a/l/a/ "Sal", and agreed that to effect the scheme, approximately 45 percent of the stock in the post-merger entity would be deposited into secret offshore nominee accounts that DOWNING would -13- 14 maintain an interest in, and that he would use to fund the payment of secret bribes to brokers who would generate trading volume in SearchHispanic.com stock. DOWNING would also allegedly sell his personal holdings of stock to enrich himself and others. As part of the scheme, SAMUEL WARD and DANIEL DRUCKER, both certified public accountants, allegedly agreed to falsify the financial statements of SearchHispanic. com and GTrade, and to issue unqualified audit opinions certifying that the financial statements of the companies were accurate. 5. Cybersentry, Inc.: Cybersentry, Inc. was a Florida-based communications software company that specialized in facilitating secure communications on the Internet. Cybersentry common stock previously traded on the OTC Bulletin Board, and in May 2000 commenced trading on the American Stock Exchange. Two Indictments charging fraud in connection with Cybersentry were unsealed today--United States v. Wager, et al, 00 Cr. 629, and United States v. Brigandi, et al., 00 Cr. 630. According to the Indictments, NEIL WAGER, an individual residing in Boca Raton, Florida, and BRUCE BRIGANDI, an individual residing in Roslyn Heights, New York, each allegedly acquired a large block of Cybersentry common stock. According to the Wager Indictment, shortly after acquiring the shares, WAGER agreed to pay undisclosed bribes to KARL FREDERICK GRAFF, a stock broker employed by Equitrade Securities Corp., in exchange for efforts by GRAFF to sell WAGER's stock to GRAFF's retail clients. According to the Brigandi Indictment, shortly after acquiring his shares, BRIGANDI participated in an illegal scheme in which he agreed to pay bribes to brokers in exchange for their efforts in generating retail demand for Cybersentry common stock. It is alleged that these frauds occurred from March 2000 to June 2000. -14- 15 6. Bookdigital.com. Bookdigital.com was a New York-based corporation that held itself out as a development-stage company in the business of creating and operating reference sites on the Internet. In a Complaint captioned United States v. Vahab, 00 Mag. 1120, RAY VAHAB, the Chairman of the Board and Chief Executive Officer of Bookdigital.com, allegedly controlled a vast majority of the Bookdigital.com stock, and was also the owner of First Madison Securities, a New York-based broker-dealer. The Complaint alleges that from April 2000 to June 2000, VAHAB embarked on a scheme in which he would first raise capital by paying bribes to brokers to sell Bookdigital.com private placement stock, and then manipulate the publicly-available stock by "reverse merging" Bookdigital.com into a publicly-traded shell corporation. 7-9. Exchange Online, Inc., Amerivest, Online, Inc., and Franklin Services Corp.: Each of these three companies purported to be involved in Internet-related businesses, and were allegedly the subject of sham private placement offerings as set forth below in United States v. Tavolacci, et al., 00 Cr. 554. FRAUD AND MANIPULATION OF PUBLICLY TRADED SECURITIES Certain of the Indictments and Complaints unsealed today charge fraud in connection with the markets for publicly-traded securities. 1. In United States v. Dacunto, et al., 00 Cr. 620, 26 defendants were charged with manipulation of four of the publicly-traded securities identified in the Lino Indictment as being the subject of manipulation by the RICO Enterprise--Spaceplex, Reclaim, Bearchport, and International Nursing. The defendants named in the Dacunto Indictment, which covers the period from December 1994 to late 1996, include persons -15- 16 who served as brokers at Monitor Investment Group, the broker-dealer controlled by the RICO Enterprise that was used to manipulate the markets in the above-mentioned publicly-traded securities. The defendants named in the Dacunto Indictment include the following persons, who were either promoters, managers, or licensed or unlicensed brokers: ROBERT J. DACUNTO; MICHAEL P. DACUNTO; JOSEPH P. MEDURI; VINCENT A. PADULO, JR..; VITO G. PADULO, JOHN BRUZZESE; SALVATORE F. RUGGIERO; PATRICK GIGLIO, a/k/a "Patty"; CHESTER L. CHICOSKY; LAWRENCE M. CHOINIERE; WILLIAM P. BURKE; KEVIN RADIGAN; GEORGE F. BISNOFF; DAMIEN R. DOUGLAS; CRAIG P. MCGUINN, II; MARC L. WEISSMAN; MARK M. DANIELI; IRVING STITSKY; PAUL L. BURTON; KENNETH J. FUINA; MARC I. BURTON; EMMANUEL G. GENNUSO; and FACUNDO PONCE, a/k/a/ "Frank". 2. United States v. Wolfson, et al., 00 Cr. 628, charges seven persons in a scheme, occurring from 1988 to May 2000, to manipulate the stock of five companies whose securities traded on the OTC Bulletin Board or the NASDAQ Small-Cap Market. They include: (a) ATR Industries, Inc., a Ft. Lauderdale company in the business of operating home cleaning services; (b) Rollerball International, Inc., a Delaware corporation that manufactured inline roller skates; (c) Learners World, Inc., a New York corporation that operated learning and day care centers for children; (d) Healthwatch, Inc., a Minnesota corporation that manufactured medical products; and (e) Hytk Industries, Inc. a Nevada corporation that produced and transported natural gas. The Defendants charged in this case are: ALLEN WOLFSON, a Salt Lake City-based stock promoter who was a consultant to Cyberamerica Corp., a company that -16- 17 purported to be in the business of providing financial consulting services to distressed public companies; MICHAEL GRECCO, a New York-based stock promoter; JOHN MICHAEL BLACK, a stock broker and principal of Grady and Hatch and Co., a Manhattan broker-dealer; SPIRO LAZARETOS, a broker who worked at Caribbean Securities, a New York broker-dealer, and at Grady and Hatch; ROBERT BALSAMO, a stock promoter who worked at Wolff Investment Group and Delta Asset Manager, both New York broker-dealers; VLADIMIR CARVALLO, a stock broker affiliated with Morgan Grant Capital Corp., a New York broker-dealer, and with Delta Asset Management; and KONSTANTINOS DINO SONITIS, a stockbroker at Bell Investment Group, a New York-based broker-dealer. According to the Indictment, WOLFSON allegedly received large amounts of stock in the companies, either free-of-charge or at substantial discounts, and then allegedly agreed to pay GRECCO a bribe equal to between 40 and 70 percent of the value of the retail sales of WOLFSON's stock as generated by stock brokers under GRECCO's control. To effect the scheme, GRECCO allegedly recruited the other defendants to sell WOLFSON's stock in exchange for bribes. WOLFSON also allegedly instructed his coconspirators that his stock be "crossed with," or purchased by, the retail customers, which he accomplished by directing the brokers to direct their trades to certain market makers that were in league with WOLFSON. 3. United States v. Gasparik, et al., 00 Cr. 650, charges fraud, from April 2000 to June 2000, in connection with the stock of Harbour Intermodal Ltd., a development-stage company that planned to provide local freight shipping among rail, truck and water transportation companies in the New York harbor area, and that traded on -17- 18 the OTC Bulletin Board. The Indictment charges that, as of April 2000, MICHAEL GASPARIK, Harbour Intermodal's Chief Executive and Chairman of the Board, owned 87 percent of Harbour's common stock. GASPARIK allegedly sought the assistance of Michael Grecco, a stock promoter, and agreed to give Grecco large amounts of Harbour stock as substantial discounts, if Grecco and others would inflate the share price of Harbour stock through fraudulent Internet promotions and by paying bribes to brokers in return for selling Harbour stock to their clients. In order to facilitate the scheme, David W. Bruno and Adam Kriftcher allegedly agreed to feature Harbour on Internet websites under their common control in exchange for payments of Harbour stock. In addition, GASPARIK allegedly recruited ROGER FIDLER, an attorney, to prepare SEC filings that were false because, among other things, they allegedly concealed the agreement to pay bribes to brokers in return for purchases by their customers of Harbour stock, and allegedly concealed GASPARIK's control of a trust used to conceal the payment to Grecco of large amounts of Harbour stock. 4. United States v. Lugo, 00 Mag. 1119, is a Complaint charging fraud, from May 1999 to June 1999, in connection with the securities issued by Premier Classic Art, Inc. ("PART"), and which traded on the OTC Bulletin Board. JOSEPH LUGO, the defendant, was in control of PART's management, and controlled a large block of its stock. According to the Complaint, LUGO allegedly met with members and associates of organized crime, including Robert Lino, a/k/a/ "Little Robert," and devised a scheme in which he would obtain a falsely inflated, $10 million appraisal for certain assets, i.e., original animation drawings, and then "reverse merge" a company holding those assets into PART, a large amount of the stock of which was controlled by LUGO. In fact, -18- 19 LUGO allegedly did conduct a "reverse merger," and obtained the false appraisal which valued the assets at $12 million to $20 million. FRAUD IN THE SALE OF PRIVATELY PLACED SECURITIES Other of the Indictments and Complaints unsealed today charge fraud in connection with the private placement of securities. Many of these schemes involve "boiler room" sales tactics, and the payment of secret extraordinary commissions to brokers in exchange for their efforts in selling the stock, which commissions are concealed from the investors. 1. United States v. Tavolacci, et al., 00 Cr. 554, charges 18 defendants in connection with five fraudulent private placement stock offerings that extended from April 1997 to May 1999. According to the Indictment, groups of non-registered stock brokers, or "cold callers," using scripts replete with false and fraudulent information, made unsolicited "cold" calls to potential investors to induce them to invest in the sham private placements. In selling the stock, the cold callers allegedly: (a) concealed the fact that they were receiving extraordinary compensation equal to approximately thirty percent of the value of the funds they raised from investors; (b) used false names when speaking to investors; (c) misrepresented that investor funds would be used by the issuer for business purposes, when in fact more than 50 percent of the money raised in each private placement was used to pay brokers and unlawfully enrich the principals of the issuer; (d) misrepresented that each issuer would conduct an initial public offering ("IPO") of its common stock shortly after the investors' purchase of common stock in the private placement; and (e) misrepresented that the issuers were successful businesses. -19- 20 The issuers involved in this alleged scheme were the following: (a) First Fidelity Financial Co., purportedly an investment banking firm in Manhattan; (b) Exchange.Online, purportedly an online financial and business "cybermall" located in Delaware; (c) First Fidelity Equities, purportedly a Manhattan brokerage firm; (d) Amerivest.Online, purportedly a Manhattan business that designed customer web sites; and (e) First Commerce Corp., purportedly a Manhattan investment adviser firm. Among the defendants indicted were: SALVATORE TAVOLACCI, executive vice-president of First Fidelity Financial Corp. and First Fidelity Investment Management ("FFIM"); KARL DONOVAN, Vice President of Exchange Online; FREDERICK WALL, President, Treasurer and Secretary of First Fidelity Equities; DEREK SHAPIRO, a/k/a "David Shapiro," an officer of First Fidelity Equities; AARON SANDSTROM, Vice-President of Amerivest; and DONALD BROOKS, president of and secretary of First Commerce. Also indicted were 12 persons who worked as cold-callers. 2. United States v. Torregrossa, et al., 00 Cr. 648, charges two defendants in connection with a fraudulent private placement stock offering by Franklin Services Corp. which held itself out as an investment banking, real estate, and media firm that intended to service clients via the World Wide Web. According to the Indictment, between February 1999 through June 2000, MARK TORREGROSSA, President and Chief Executive Officer of Franklin Services, and JAMES MONTES, an unlicensed broker, fraudulently sold Franklin Services stock by fraudulent means, including: (a) paying secret extraordinary compensation to brokers to sell the stock, while telling investors that their funds would be used for business purposes; (b) representing that a Franklin Services IPO would occur shortly after the investors purchased private placement stock; -20- 21 and (c) representing that Franklin Services would soon be acquired by Amazon.com, and was planning to acquire Circuit City and Toy R Us. 3. United States v. Zavats, et al. 00 Cr. 247, charges eight defendants in connection with an alleged fraudulent private placement stock offering that extended over a two-year period from 1996 to 1998 and involved three companies: (i) Traveler's Infocenter, which represented itself to be a New York, development-stage company involved in providing travel-related information; (ii) Diagnostic Professional Imaging Services, which represented itself to be a Brooklyn-based, development-stage company that planned to provide MRI services; and (iii) Nationwide, which represented itself to be a Brooklyn-based, development stage medical supply company. The scheme to defraud in connection with all three private placements involved false representations to investors that the companies had promising business prospects, that all investor funds would be used for business purposes, and the use of phony names by brokers selling the private placement stock. Among the defendants indicted were the following: MARK HIMMELBERGER, Traveler's Infocenter's President and Treasurer, JUSTIN MARVUL, a/k/a "Eric Feldman," Traveler's Infocenter's Vice President and Secretary and the Treasurer of Diagnostic; WARAT ZAYATS; the Vice President and Secretary of Nationwide who sold Traveler's securities; GREGORY LEVIN, the President and Treasurer of Nationwide who sold Traveler's securities; MICHAEL DANILOVICH, Diagnostic's President and Secretary; HARVEY OSHER, a/k/a "Harvery Cohen"; and JAMES GABERKORN and VADIM SHAPIRO, registered representatives who worked at Hornblower and Weeks, a broker-dealer, and sold Diagnostic private placement stock. -21- 22 4. United States v. Gladstone, et. al., 00 Cr. 652, charges four defendants with fraud in connection with the private placement of stock issued by Ivy Entertainment.com, Inc. a marketing and distribution company specializing in the entertainment, hospitality, financial and technology businesses. The defendants include: RICHARD GLADSTONE, Ivy's President; HOWARD HELFANT, Ivy's Executive Vice President; GUS GELMAN, who recruited brokers to sell Ivy securities, and ROBERT WADE, who sold Ivy securities. According to the Indictment, from May 1999 to October 1999, the defendants, in order to sell Ivy securities, agreed to pay exorbitant sales commissions to brokers, and to conceal those payments from investors. 5. United States v. Amato, et al., 00 Mag 1109, charges three defendants with securities fraud, from 1998 to June 2000, in connection with the private placement of stock of Future Fitness, Ltd., a company that operated health clubs in the New York City area. The defendants include: RENE ARMANDO DEPERALTA, JOHN AMATO, a/k/a "Flames," the Chief Operating Officer of Future Fitness, and FRANK ROTELLA, the Chief Executive Officer of Future Fitness. The scheme allegedly involved the payment of secret bribes equal to approximately 40 percent of the value of Future Fitness common stock in return for brokers selling the stock to unsuspecting investors, and falsely telling investors that the proceeds of the private placement would be used in Future Fitness' business. 6. United States v. Yilmaz, et al., 00 Cr. 248, charges three defendants with securities fraud, from February 1998 to August 1998, in connection with a private placement of stock of Alliance Technology, an information technology services company located in Manhattan. The Complaint names as defendants HAYRI YILMAZ, Alliance's -22- 23 President and Chief Executive Officer, and KENNETH JEFFERSON and MERRICK C. SMITH, two person hired by Alliance to recruit investors to purchase Alliance stock. The scheme allegedly involved falsely telling investors that an IPO for Alliance's stock was close at hand, paying secret bribes to brokers in return for their efforts in selling Alliance stock to unsuspecting investors, and telling investors that the proceeds of the private placement would be used in Alliance's business. ADDITIONAL INFORMATION In connection with today's arrest, search warrants were executed at the following locations: (a) the offices of DMN Capital at 5 Hanover Square in Manhattan; (b) offices of the Detectives' Endowment Association; (c) the residence of STEPHEN GARDELL in Staten Island, New York; (d) residence of JAMES S. LABATE, a/k/a "Jimmy," in Staten Island, New York; (e) offices of ALLEN WOLFSON and Cyberamerica in Salt Lake City, Utah; and (f) offices of GENE PHILLIPS and A. CAL ROSSI at Basic Capital Management, in Dallas, Texas. Simultaneously with today's announcement, the United States Securities and Commission announced the filing of three administrative proceedings alleging fraud-related charges against a total of 41 respondents. These include one administrative proceeding against 33 persons arising out of the private placement fraud at Monitor Investment Group; one against seven persons arising out of the conduct alleged in United States v. Wolfson, et al.; and one against WILLIAM STEPHENS. The SEC further announced that it has imposed halts in trading on the OTC Bulletin Board of securities issued by Wamex Holdings Inc., and E-Pawn, Inc. -23- 24 Previously, NASD Regulation filed a complaint against 18 persons and Monitor Investment Group for fraud-related activities arising out of Monitor's activities with respect to Accessible Software, Inc. All defendants were fined and suspended and/or barred from associating with an NASD member. Ms. WHITE praised the efforts of all of the law enforcement agencies involved, and particularly commended the outstanding investigative efforts of the FBI. Ms. WHITE also thanked the United States Securities and Exchange Commission for its assistance, and the Criminal Prosecution Assistance Group of NASD Regulation, Inc. for its help. Assistant United State Attorneys PATRICK J. SMITH, DAVID C. ESSEKS, CHRISTOPHER J. CLARK, STEFANIE B. ISSER, MYLAN L. DENERSTEIN, and Special Assistant United States Attorney JASON SABOT are in charge of the prosecutions. The charges contained in the Indictments and Complaints are merely accusation, and the defendants are presumed innocent unless and until proven guilty. The names, date of birth, area of residence, charges and maximum penalty per charge for each of the defendants is set forth on the attached chart. -24- 25
MAXIMUM INDICTMENT TYPES OF PENALTY PER OR DEFENDANT DOB RESIDENCE CHARGES CHARGE COMPLAINT --------------------------- -------- ------------------ ------- ----------- --------- 1 AMATO, JOHN, a/k/a "Flames" 01/15/73 Elizabeth, NJ SF 10 AMATO 2 ROTELLA, FRANK 03/07/62 Middletown, NJ SF 10 AMATO 3 DEPERALTA, RENE ARMANDO 06/10/73 Staten Island, NY SF 10 AMATO 4 BRIGANDI, BRUCE 01/22/55 Roslyn Heights, NY SF 10 BRIGANDI 5 CUSHING, MITCHELL 05/12/62 New York, NY C 5 CUSHING 6 CHIMENTI, RUSSELL 02/09/71 Staten Island, NY C 5 CUSHING 7 DETRANO, ROGER 10/17/44 Maspeth, NY C 5 CUSHING 8 HIDALGO, ANTHONY 11/01/77 Brooklyn, NY SF 10 CUSHING 9 DACUNTO, ROBERT J. 06/24/81 Staten Island, NY C, SF 5, 10 DACUNTO 10 DACUNTO, MICHAEL P. 01/10/74 Pittsburgh, PA C, SF 5, 10 DACUNTO 11 MEDURI, JOSEPH P. 08/23/70 Staten Island, NY C, SF 5, 10 DACUNTO 12 PADULO, JR., VINCENT A. 11/09/55 New York, NY C, SF 5, 10 DACUNTO 13 PADULO, VITO G. 03/15/62 New York, NY C, SF 5, 10 DACUNTO 14 BRUZZESE, JOHN 07/25/70 Manalapan, NJ C, SF 5, 10 DACUNTO 15 RUGGIERO, SALVATORE F. 01/08/72 Marlboro, NJ C, SF 5, 10 DACUNTO 16 GIGLIO, PATRICK, a/k/a "Patty" 10/03/62 Staten Island, NY C, SF 5, 10 DACUNTO 17 STITSKY, IRVING 08/11/54 Brookville, NY C, SF 5, 10 DACUNTO 18 BURTON, PAUL L. 05/11/62 C, SF 5, 10 DACUNTO 19 BURTON, MARK I. 11/21/59 Melville, NY C, SF 5, 10 DACUNTO 20 FUINA, KENNETH J. 06/22/50 White Plains, NY C, SF 5, 10 DACUNTO 21 GENNUSO, EMMANUEL G. 01/11/47 Brooklyn, NY C, SF 5, 10 DACUNTO 22 MCGUINN, II, CRAIG P. 03/27/67 Brooklyn, NY C, SF 5, 10 DACUNTO 23 WEISSMAN, MARC L. 03/01/67 New York, NY C, SF 5, 10 DACUNTO 24 PONCE, FACUNDO, a/k/a "Frank" 06/29/70 Williston Park, NY C, SF 5, 10 DACUNTO 25 DINOTA, JR., ANTHONY P. 11/03/85 New Hyde Park, NY C, SF 5, 10 DACUNTO 26 RADIGAN, KEVIN P. 02/15/68 New York, NY C, SF 5, 10 DACUNTO 27 CASO, MICHAEL 08/30/60 Brooklyn, NY C, SF 5, 10 DACUNTO 28 CATALANO, JR., JOHN 12/23/67 Brooklyn, NY C, SF 5, 10 DACUNTO 29 BURKE, WILLIAM P. 01/01/63 Lattingtown, NY C, SF 5, 10 DACUNTO 30 CHICOSKY, CHESTER L. 04/02/63 Fairfield, CT C, SF 5, 10 DACUNTO 31 CHOINIERE, LAWRENCE M. 06/20/49 Williamsburg, VA C, SF 5, 10 DACUNTO 32 DOUGLAS, DAMIEN R. 08/19/68 Jamaica, NY C, SF 5, 10 DACUNTO 33 BISNOFF, GEORGE P. 01/08/61 Roslyn, NY C, SF 5, 10 DACUNTO 34 DANIEL, MARK M. 10/04/60 New York, NY C, SF 5, 10 DACUNTO 35 DOWNING, JAMES 01/30/63 Amityville, NY C 5 DOWNING 36 WARD, SAMUEL 03/12/32 New York, NY C 5 DOWNING 37 DRUCKER, DANIEL 03/15/63 New York, NY C 5 DOWNING 38 GASPARIK, MICHAEL T. 07/07/24 Ridgewood, NJ C 5 GASPARIK 39 FIDLER, ROGER L. 01/16/51 Ridgewood, NJ C 5 GASPARIK 40 GREYLING, LESLIE 05/14/52 London, England C; SF; WF 5, 10, 5 GREYLING 41 LIEBOWITZ, ELI 09/01/43 Englewood, NJ C; SF; WF 5, 10, 5 GREYLING 42 ALEXANDER, TINA 02/15/66 Houston, TX C; SF; WF 5, 10, 5 GREYLING 43 GLADSTONE, RICHARD 08/30/55 Boca Raton, FL C; SF; WF 5, 10, 5 GLADSTONE 44 HELFANT, HOWARD 06/03/56 Boca Raton, FL C; SF; WF 5, 10, 5 GLADSTONE 45 GELMAN, GUS 10/27/66 Atlanta, GA C; SF; WF 5, 10, 5 GLADSTONE 46 WADE, ROBERT C; SF; WF 5, 10, 5 GLADSTONE 47 LABARBARA, STEPHEN 09/20/64 Howell, NJ SF 10 LABARBARA 48 LAKEN, GLENN B. 02/20/54 New York, NY C; SF; WF 5, 10, 5 LAKEN 49 BRUNO, DAVID W. 08/15/69 Patchogue, NY C; SF; WF 5, 10, 5 LAKEN 50 KRIFTCHER, ADAM 05/28/60 Valley Stream, NY C; SF; WF 5, 10, 5 LAKEN 51 PORRICELI, MICHAEL 12/03/66 Denver, CO C; SF; WF 5, 10, 5 LAKEN 52 REIFLER, LIONEL 03/24/39 Boca Raton, FL C; SF; WF 5, 10, 5 LAKEN
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53. WORRELL, PETER J. 10/06/72 Woodbury, NY C; SF; WF 5, 10, 5 LAKEN 54. LUGO, JOSEPH 05/23/44 Fords, NJ C 5 LUGO 55. LINO, ROBERT A., a/k/a "Little 08/30/66 Brooklyn, NY R; RC; 20, 20, 5, LINO Robert" C;SF;MLC;WF;IK 10, 20, 5, 3 56. LABATE, JAMES S., a/k/a "Jimmy" 04/25/55 Staten Island, NY R; RC; 20, 20, 5, LINO C;SF;MLC;WF;IK 10, 20, 5, 3 57. PERSICO, FRANK A., a/k/a "Frankie" 02/07/63 Staten Island, NY R; RC; C; 20, 20, 5, LINO SF; WF 10, 5 58. STROPOLI, ANTHONY P. 01/07/63 Old Bridge, NJ R; RC; SF; 20, 20, 10, LINO MLC 20 59. PIAZZA, SALVATORE R., a/k/a "Sal" 09/15/51 Howard Beach, NY R; RC; 20, 20, 5, LINO C;SF;MLC;WF;IK 10, 20, 5, 3 60. GARDELL, STEPHEN E. 05/24/47 Staten Island, NY R; RC; WF 20, 20, 3 LINO 61. CIMINO, CARY F. 09/17/60 New York, NY R; RC; C; 20, 20, 5, LINO SF; MLC; WT 10, 20, 10 62. RAMETTA, SEBASTIAN, a/k/a "Sebbie" 09/09/65 Staten Island, NY R; RC; SF 20; 20; 10 LINO 63. CHICKARA, JAMES. F. 10/13/54 Holmdel, NJ R; RC; SF 20; 20; 10 LINO 64. DEMATTEO, RALPH, a/k/a "Ralphie" 06/16/55 Staten Island, NY MLC 20 LINO 65. GALLO, ROBERT P., a/k/a "Bobby" 08/31/58 Freehold, NJ R; RC; C; 20; 20; 5; LINO SF; MLC 10; 20 66. GRECCO, MICHAEL T. 05/25/60 Staten Island, NY R; RC; SF; 20; 20; 10; LINO MLC 20 67. BLACK, JR., JOHN M. 04/23/58 Jamesburg, NJ R; RC; WF; IK 20;20;5;3 LINO 68. CALVELLO, ANGELO, a/k/a "Tony" 05/26/40 Mohegan Lake, NY R; RC; C; 20; 20; 5; LINO SF; IK 10; 3 69. MANN, JOSEPH A., a/k/a "Andy" 01/12/38 New York, NY R; RC; C; 20; 20; 5; LINO SF; WF; IK 10; 5; 3 70. STEPHENS, WILLIAM M. a/k/a "Bill" 01/31/52 Mill Valley, CA R; RC; C; 20; 20; 5; LINO WF; IK 5; 3 71. LAKEN, GLENN B. 02/20/54 New York, NY R; RC; C; 20; 20; 5; LINO WF; IK 5; 3 72. PHILLIPS, GENE 10/17/37 Dallas, TX R; RC; C; 20; 20; 5; LINO WF; IK 5; 3 73. ROSSI, A. CAL 08/13/36 Dallas, TX R; RC; C; 20; 20; 5; LINO WF; IK 5; 3 74. LANGELLA, VINCENT G., a/k/a "Vinny" 12/30/61 Staten Island, NY R; RC; C; SF 20; 20; 5; 10 LINO 75. PALLA, WILLIAM F. 05/14/52 New York, NY R; RC 20; 20 LINO 76. NEJAIME, TODD M. 02/14/66 New York, NY R; RC; SF; 20; 20; 10; LINO MLC 20 77. DAPUZZO, STEVEN J. 12/02/69 Delray Beach, FL SF 10 LINO 78. RICOTTONE, CHARLES 09/01/57 Brooklyn, NY EXT 20 RICOTTONE 79. TAVOLACCI, SALVATORE 08/11/72 Staten Island, NY C; SF; WF 5; 10; 5 TAVALACCI 80. DONOVAN, KARL 05/28/72 Flushing, NY C; WF; WF 5; 10; 5 TAVALACCI 81. WALL, FREDERICK 04/14/58 Elmhurst, NY C; SF 5; 10 TAVALACCI 82. SHAPIRO, DEREK, a/k/a "David 06/30/77 New York, NY C; SF 5; 10 TAVALACCI Shapiro" 83. SANDSTROM, AARON 11/02/77 Huntington Station, C; SF 5; 10 TAVALACCI NY 84. BROOKS, DONALD 05/03/66 New York, NY C; SF 5; 10 TAVALACCI 85. FERLISI, RONALD 12/27/74 Staten Island, NY C; SF 5; 10 TAVALACCI 86. TELMANY, EDWARD 04/05/75 Staten Island, NY C; SF; WF 5; 10; 5 TAVALACCI 87. SANDSTROM, DANIEL 03/17/71 Ridgewood, NY C; SF 5; 10 TAVALACCI
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88. SANGEMINO, DANIEL 07/29/75 Farmingdale, NY C; SF; WF 5; 10; 5 TAVALACCI 89. LABELLA, JAY 05/31/79 Staten Island, NY C; SF 5; 10 TAVALACCI 90. MONTES, JAMES 01/25/73 Little Neck, NY C; SF 5; 10 TAVALACCI 91. MONTES, MARLIN 11/26/65 Queens, NY C; SF 5; 10 TAVALACCI 92. CRAWFORD, CARLTON, a/k/a "Ross" 11/01/71 Ellenville, NY C; SF 5; 10 TAVALACCI 93. ODENHAL, JOSETTE 11/14/74 Brooklyn, NY C; SF 5; 10 TAVALACCI 94. ALEXANDER, STEVEN 09/19/72 Farmingdale, NY C; SF 5; 10 TAVALACCI 95. MURRAY, GREG 05/01/66 Jersey City, NJ C; SF; WF 5; 10; 5 TAVALACCI 96. WIGGINS, KEITH 12/20/67 Baldwin, NY C; SF 5; 10 TAVALACCI 97. TORREGROSSA, MARK 04/23/73 Middle Village, NY C; SF 5; 10 TORREGROSSA 98. MONTES, JAMES 01/25/73 Little Neck, NY C; SF 5; 10 TORREGROSSA 99. TRIPPE, EDWARD 08/10/65 Brooklyn, NY C; SF; MF 5; 10; 5 TRIPPE 100. BECKER, BRUCE 07/23/68 Staten Island, NY C; SF; MF 5; 10; 5 TRIPPE 101. ADAMS, ANDREW 03/03/51 Brooklyn, NY C; SF; MF 5; 10; 5 TRIPPE 102. WARD, SAMUEL 03/12/32 New York, NY C 5 TRIPPE 103. MCGUIRE, BRYAN 12/21/71 Tappan, NY C 5 TRIPPE 104. OPPITO, PATRICIA 11/09/60 New York, NY C 5 TRIPPE 105. VAHAB, RAY 03/24/48 New York, NY C 5 VAHAB 106. WAGER, NEIL 01/30/44 Garden City, NJ C; SF; WF 5; 10; 5 WAGER 107. GRAFF, KARL FREDERICK 03/22/68 San Diego, CA C; SF; WF 5; 10; 5 WAGER 108. WOLFSON, ALLEN 01/02/46 Salt Lake City, UT C; SF; WF 5; 10; 5 WOLFSON 109. GRECCO, MICHAEL 05/25/60 Staten Island, NY C; SF; WF 5; 10; 5 WOLFSON 110. BLACK, JOHN MICHAEL 04/23/58 Jamesburg, NJ C; SF 5; 10 WOLFSON 111. LAZARETOS, SPIRO 05/01/65 Brooklyn, NY C; SF 5; 10 WOLFSON 112. BALSAMO, ROBERT 04/25/73 Northport, NY C; SF 5; 10 WOLFSON 113. CARVALLO, VLADIMIR 06/29/66 Astoria, NY C; SF 5; 10 WOLFSON 114. SONITIS, KONSTANTINOS DINO 10/08/72 Brooklyn, NY C; SF 5; 10 WOLFSON 115. YILMAZ, HAYRI 04/18/66 Rutherford, NJ C; SF 5; 10 YILMAZ 116. JEFFERSON, KENNETH 09/30/55 Bronx, NY C; SF 5; 10 YILMAZ 117. SMITH, MERRICK C. 05/15/54 Brooklyn, NY C; SF 5; 10 YILMAZ 118. ZAYATS, MARAT, a/k/a "Mark Zayats" 10/21/70 Brooklyn, NY C; SF; MF; 5; 10; 5; ZAYATS ML; P; WT 20; 5; 10 119. LEVIN, GREGORY 03/09/76 Brooklyn, NY C, SF, MF, WT 5; 10; 5; 10 ZAYATS 120. MARVUL, JUSTIN, a/k/a "Eric 07/28/73 Brooklyn, NY C, SF, MF, 5; 10; 5; ZAYATS Feidman" ML, WT 20; 10 121. OSHER, HARVEY, a/k/a "Harvey Cohen" 06/10/67 Brooklyn, NY C, ML 5; 20 ZAYATS 122. HIMMELBERGER, MARK 07/05/62 Brooklyn, NY C, SF, MF, ML 5; 10; 5; 20 ZAYATS 123. DANILOVICH, MICHAEL 08/30/73 Brooklyn, NY C, SF, MF, WT 5; 10; 20; 10 ZAYATS 124. GABERKORN, JAMES 05/12/69 Brooklyn, NY C, SF 5; 10 ZAYATS 125. SHAPIRO, VADIM 04/18/71 Baltimore, MD C, SF 5; 10 ZAYATS
-27- 28 CHARGE LEGEND C Conspiracy IK Illegal Kickbacks EXT Extortion MF Mail Fraud ML Money Laundering MLC Money Laundering Conspiracy P Perjury R RICO RC RICO Conspiracy SF Securities Fraud WF Wire Fraud WT Witness Tampering
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