The Scorpion and the Frog:
High Times and High Crimes
What is interesting about the details of when the stock pump-and-dump manipulation occurred Felix Sater was involved in is the fact its story was allegedly captured in a book published years later in 2003. In this book, we hear through one of Felix Sater's partners, Salvatore "Sal" Lauria’s own voice about what it was like during this time on Wall Street, bits and pieces here and there of what it was like working with Felix as a partner and what he stated Sater’s family connections were at the time the book was written, as well as the role organized crime was playing on Wall Street during the 1990s.
There were quite a few players in the earlier stock fraud case with White Rock/State Street. Throughout this compilation of research, most of them will be named. One of the main partners with Felix at White Rock/State Street and the person, who would not only also cooperate with the FBI but also follow Sater on to Bayrock at some undetermined point in time, was Sal. Interestingly, he somehow ended up telling his (and Felix’s) story to an author by the name of David Barry. David would then do a ton of research and assist Sal with writing a book entitled The Scorpion and The Frog: High Times and High Crimes. Here is how David Barry explains the court battle for the later publication of this book:
“Writing Sal Lauria’s story was a walk on the literary wild side that did not end when the book was finished. There was plenty of adventure in the research I did to vet the criminal life story Sal told me. I spent hundreds of hours reading Justice Department strike force complaints, indictments, court rulings and sentencing reports. I combed organized crime reports by the FBI, the New York State Attorney General’s office, sanction records of the Securities and Exchange Commission, NASD on unlawful trading practices. I read hundreds of newspaper and magazine articles about stock fraud, organized crime family racketeering on Wall Street and other trading areas.
Every one of the stories Sal told me was verified by public records that I tracked down in my research. Some of the research trails were easy to follow, like looking up major news stories and working backward. Others were obscure, like discovering an e-mail posted by one of Sal’s cohorts wheeling and dealing in energy futures in the former Soviet Union. This book took me through research not only of U.S. organized crime family operations but also of organized crime run by Israelis and Russians. The tension in the story is the crossover of brutal mob intimidation and retaliation tactics in the fields of stock trading and money laundering. The book took me through stories of rock stars, socialites, dope, sex, and murder.
When the book was finished, a new adventure began. It started when Sal, through an attorney, filed a motion to block publication of the book on the grounds that his life would be in danger if names weren’t changed from real names to pseudonyms. Though every one of the referenced mobsters had been identified in major news stories before I signed on to the project, Sal did not want his name and his book to repeat the identification. Almost all of the cases against the 19 men indicted with Sal for the major stock-trading swindle related in this book had been resolved with plea bargains before I began work on the book. But the legal drama of the book, for me, was just beginning. I was questioned about my part and my experience and recollections of writing the book in depositions by attorneys for Sal and for New Millenium, the publisher.
Then the case went to court. I had the first-time experience, after years of reporting on criminal trials as a journalist, of testifying in one, as a witness. I was questioned by the New Millenium’s attorney and by Sal’s attorney. I was also questioned by the judge. Unlike a trial on TV, there was no audience and there was no press. That didn’t lessen the tension of being sworn in and testifying under oath. The courtroom proceedings that involved me were in December, 2002. Little would have surprised me more than to hear, nearly a year later, that the case had been settled and the book was being published.”
- David S. Barry, Aug. 11, 2003
It is only through this book do we get a glimpse of what took place during and after the stock manipulation scam. While Sal is specifically named throughout the book, and he’s the one who sued to try and prevent the release of the book, his name was made public throughout it. However, Felix Sater is referred to throughout the book as Lex Tersa. Keep that in mind when reading various excerpts from the book.
An oddity about this book is how it begins, ends, and doesn’t lay out a clear timeline. We will review what’s important but as you read through, understand the book starts at the end of the story when their brokerage firm is close to collapse and then jumps into the beginning and finally closes back at the tail end again, picking back up around the same period it began, which seems to be fall of 1996 and concludes likely around 1997-1998. (Dates and years are not clearly detailed, though and only vague ideas of timing are noted throughout, with the best guess of additional research, but are still only guesses.)
*Excerpts from this book will be detailed here in the timeline of this website because it’s covering the stock manipulation scheme they participated in between 1993-1996, but the book was not published until 2003.
**This is a lengthy read you may want to skip and come back to when you have more time. I've condensed down an almost 300-pg book into probably roughly 1/3 of that, but it is still a lot to review the major points and context of the story and associated details within this book.
***This book can be rented for two weeks for free online and read in full on the website, the Internet Archive, here.
Sal Lauria’s story kicks off with him and another partner involved in the scam, Gennady “Gene” Klotsman, taking a business trip/vacation to St. Tropez, France. They are stressed because their business, renamed to State Street by this point (August 1996) was under siege by short traders; parties who were actively working to bet against their company’s stock. This activity involved driving down the price of the stock lower and lower, profiting off the value as the stock drops.
They also had other problems. Apparently they were already aware at this time in in August of 1996 their company had become a target of the SEC, the IRS, and the FBI. Even worse in their view, they thought they might be “in the sights of somebody’s revenge plans in the Mob. "The Duke, Gene and I, and Lex Tersa, a Russian business partner who had stayed behind in New York, had all ascended the financial pyramid very quickly, and some of the people who had helped us on the way up didn’t think we had treated them as well as they deserved,” Sal would state in his voice within this book.
In an interesting passage, Sal states they were aware of eavesdropping devices, “bugs” in their offices. The devices were “one or two generations more technologically sophisticated than those usually planted by the FBI or the SEC--that meant competitors, the Mob, or someone else.” He refers to a federal investigation underway into illegal stock manipulations called Operation Street Cleaner. Sal states he had the feeling they were being set up.
Keep in mind this is August 1996, and we know White Rock/State Street collapsed the following month. Major media organizations like CNN and Business Week were reporting investigations into and/or indictments of such brokerage houses as Hanover Sterling, D. H. Blair & Co., and Stratton-Oakmont. Sal Lauria felt it was only a matter of time before the FBI focused on them, considering they seemed to be drawn to the scent of organized crime on Wall Street. The book states, “The terrible truth was that my partners and I had inadvertently opened our business door to members of the Bonanno, Colombo, and Genovese crime families. Yes, all three.”
In the book in Sal’s voice, he describes how the SEC was reportedly studying the stock manipulation schemes “that were standard practice in companies like ours (as well as in much bigger, more respectable houses who would fall under the prosecutorial gun later). The IRS was investigating money laundering, which was another shady aspect of our business. The knowledge on the Street that undercover investigations were everywhere made for a very uneasy business climate.”
Apparently there were many people at the time who were turning state’s evidence there reported incidents of violence based on suspicions of who might be turning on who at the time, “some of which were unfounded.” Sal states the Mafia’s branching out into territory which had not been before Mob-connected, “firms that did not involve men and women who had knowingly sought help from the Mob, as I had done, or gone into partnership with organized crime,” which had caused further scrutiny by law enforcement agencies.
Their business in St. Tropez, France in August 1996 was to confer with the “front-men, the beards, who we used to buy and sell stock to handle our Regulation S purchases and sales.” The beard could also purchase discounted stock overseas. They were negotiating with their beards to handle their next offering and settle accounts on a shoe deal whose IPO they had just taken public. The deal involved a million shares of stock being acquired by the beards at a deep discount far in advance. Their beard was a “mask,” the “nominee owner” and bought the shares at fifty cents per share, earning themselves a ten percent chunk of the profit when the stock would be opened later at five dollars per share and later moved to 12 dollars a share before it was sold. Sal and the other three partners split the remaining 90 percent. They profited in total over $11 million dollars.
Because a stock owned through a nominee in that manner should be disclosed by law, Sal admits through this book he knew he was breaking the law. By the summer of 1996, he said the Feds “were not far behind us,” “wise to our pumping and dumping, our hyping a stock with aggressive sale tactics, assuring investors it would be a moneymaker.”
The book makes note of the fact that in 1996, the SEC had “levied a $950 million fine--the largest fine in history and almost the full SEC budget for that year--on half a dozen big trading firms, a penalty for stock manipulation.”
Per Sal, strong-arm tactics used by the Mafia were commonplace during the early to mid-90s to control stocks being traded. The majority of brokerage customers are described as having “no inkling that Mob-controlled firms were manipulating stock prices and threatening the control that legitimate dealers exercised over their trades.” Sal explains he didn’t know his growing use of involving “Danny Persico, along with other members and associates of the organized crime families, had reached a point where the Justice Department Organized Crime Strike Force saw my businesses as a front for Mob activity.” He describes it as being ironic, the point when he had finally been feeling successful and validated by the luxury of his lifestyle, and had been throwing Danny Persico a little piece of the pie through his help now and then, the Feds saw them “as minor players, whose business had effectively been taken over by the people to whom” they had occasionally turned to for help when their business was being threatened.
To give an example of the level to which Sal Lauria was running at, at least where he was staying in St. Tropez for this business/vacation, he describes seeing Jack Nicholson one night and Jack sitting in the VIP section with them, that they all had a great time. It’s shortly following this encounter with Nicholson, he describes getting a phone call from “Lex,” who is really Felix. He was calling Sal because one of their stocks was again under heavy attack. Short traders were destroying the value of their IPO and profiting from the stock price dropping as a result. The stock was US Bridge of New York, a “construction-contracting firm with a good business history.” Their company had supported their public offering, but now the entire investment was under threat. They had gone long, investing over $3 million. They had a contingency plan which called for their brokers to swap stock in the shoe company, but it failed.
He describes Lex, or rather Felix as sounding “frantic” on the phone and explaining he had good reason to be freaking out. “In the game of IPOs, an attack by short traders can cut the value of stock issued in an IPO from dozens of millions of dollars to pennies on the dollar in a few days. Sometimes in only a single day. Once short traders batter a new stock, its value begins to drop, and the falling price becomes a plummeting ride down, accelerating as the price falls. The only way to stave off the attack and save the stock is to feverishly buy the stock even though its value is falling.”
Their company at White Rock/State Street had 150 brokers. Sal figured if every one of them moved a 1,000 shares, they could shore up the price of 150,000 shares of whichever stock they were trying to pump up on that day. He describes the reality as being “20 percent of our sales force did 80 percent of the business.” They needed brokers, cold-callers, and smooth, fast-talkers who could set up the sales for the brokers who would be motivated to get their clients to purchase up the stock. The freakish problem was they were in France and due to Sater’s bar fight from 1991, five years prior, he could not legally buy or sell any stock. Sal describes the stock market as being a “dance” he had learned: “Make the deal. Arrange for the under-the-table split. Arrange for the offshore deposits. Arrange the artificial support that causes a stock price to rise. Excite the brokers. Excite the buying public.”
Sal describes Felix as being “the son of a Russian gangster whose greatest desire was that Lex become a respectable businessman in America” and Sater had earned his broker’s license and the status his father had wanted for him. However, he states Felix was a “hothead,” a “smart money man but he was volatile.” Due to his bar fight, he couldn’t even set foot on their brokerage floor. Their solution had been to have work from an office in a different building. This put them in the position of having no one in place to carry out a defensive strategy while their stock was being targeted.
In the book, it is on this date Sal describes his vacation/business trip as being over, that he arranged for a lawyer to draft him documents to sell his company to a man, John Doukas, he refers to as “The Duke,” someone who “had come into the company when we had moved into our current office at the World Trade Center with $1 million in assets.” Sal states he had built that to $5.8 million in a year but now it “was plummeting and there was no telling how far it would fall.”
It is presumably around August to September of 1996 when Sal describes the following exchange. He had just sold the company to John Doukas, “the Duke,” and is planning to go to another brokerage firm as fallback. He’s driving into Manhattan and gets a phone call.
To remind the reader how long ago this was, here's the picture of a cellphone from 1996.
“‘Hello, Sal,’ said the caller, before identifying himself as an FBI agent. “How ya doin’? We got a Grand Jury subpoena here for you.’
‘Really? For what?’
‘Don’t you know?’
I was more frightened than any time I could remember.
‘Listen,’ I said, barely in control. ‘I gotta speak to a lawyer.’ Then I hung up the phone. My hands were sweating. My knees were knocking in the car. I fought to stay alert to the traffic.
The phone rang again. This time it was Lex.
‘The FBI was just here,’ Lex said. ‘They showed me pictures.’”
Lex (Felix) told Sal he had recognized pictures the FBI showed him as being Mob leaders and Wiseguys they had taken sit-down meetings with in order to “straighten out problems concerning our business,” other pictures of a different meeting they’d set up to pay them to stop their trading attack against their company. Basically, these pictures meant the Feds knew more about what they had been doing than they’d previously thought so Sal directed Felix to head to their office and start shredding. Destroy any offshore bank account documents, anything which linked to the money. Sal explains what he didn’t think of was a gym locker in Chelsea, New York with guns and documents not that far from their office. When Felix would later ignore or not be receiving the rental storage fee notices on the locker later, it would be the virtual nail in their coffins.
Sal describes meeting Danny Perisco by happenstance on a school playground, and the Persico family as being “rich from both legitimate and illegitimate businesses.” He describes the Persico family’s “100-acre farm compound, where there were three mansions, each for a different brother, a caretaker’s house, and a racetrack for a family member who raised thoroughbreds.”
Though Sal describes a pre-teen to teenage years relationship with Danny, they fell out of touch during a period when Sal got into drugs. He states between college, a manufacturing job he was employed at, and dealing drugs as well as partying, he had left Brooklyn behind. He stated their “friendship was never forgotten, just placed on hiatus for what would be five critically important years for both of us.”
Maybe a little surprisingly since we are discussing the Mafia, Sal said Danny was against the use and sale of narcotics and if he had been around Sal during the time of his life he was taking too much drugs, Danny would have been a voice of reason for him to knock it off. It took Sal 35 days in rehab, but he got off the drugs. It was only after leaving rehab and working for his brother-in-law’s tile company that he decided he wanted to start his business and sought the capital he needed from Danny. Danny joined him as a partner in starting the company, investing $5,000 in exchange for a percentage from each tile customer Danny completed, or essentially each job. It was a ten to fifteen percent cut “whenever there was enough to share” and he describes it as not being “a hard and fast deal. Danny accepted whatever payments I gave him, as income on an investment in a new company that would provide a fair return on his loan.”
In Sal’s voice, he describes what the result was of obtaining startup capital for his own tile company from Danny. “I did not realize that I had entered a world where business ultimately transcends friendship, but that became apparent as time went by. The jobs Danny’s family were getting me increasingly became work I didn’t want --jobs that were favors for someone in or connected with the Mob. One contract was with a Catskills hotel owner who was supposed to get a job done by me as a favor from one Wiseguy to another Wiseguy. The job didn’t pay well but I had to take it. I hired nothing but Mexicans and cheap labor and did a cheap job. I think that’s the first time I realized I was being manipulated by the Mob and I didn’t like it.”
Sal had met, started dating, and after two years married a girl named Linda while he had his own tile business. However, he had a cousin also named Sal who was working on Wall Street. Let’s refer to him from here one out as Sal-2. Specifically, Sal-2 had worked at Gruntal & Co. and only recently had transitioned to Shearson Lehman. Sal-1 was growing weary of the hard physical labor associated with his tile company and accepted his cousin’s invitation for he and his wife, Linda, to attend a party in Southampton. Gruntal happened to be the brokerage firm Felix Sater was working at, and he was in attendance at the party. Sal learned cold callers were making about $200 a week and decided to change his line of business from the tile company to taking a run at Wall Street. Sal-2 could get him an interview over at Gruntal, so when Sal-1 showed up for the interview, he was happy to see the familiar faces from the party.
Sal describes Gruntal as a “mid-size, mid-tier stock brokerage firm that was part of a national chain” and that he didn’t realize until after getting the job and working there the clientele was “a cross-section of wealthy, influential American investors with degrees from major universities, men who read the New York Times and the Wall Street Journal.” The best approximation of when this was is either 1989 or 1990. Sal states his interview was essentially, “So do you want to be rich?” to which Sal replied, “Absolutely,” and was then informed he got the job. By the time 1991 rolls around, the year of Sater’s bar fight, it happens to be the night they are celebrating Sal passing his brokers exam, his transition from being a cold-caller to a broker. They were all at Rio Grande at 39th Street and Third in New York, Sal there with his wife, and Felix was single; no wife or girlfriend at the time.
An interesting detail placed in the book is Sal stating Sater’s “father was a gangster who specialized in counterfeiting and had served time in England for making and passing the British pound and dollars” and that he was “suspected of passing other foreign currency in Russia where it was harder to detect,” and confusingly, that Sater’s family emigrated “from Russia just before the collapse of the Soviet Union” and had moved their family to “America for greater opportunities in the crime that was attributed to the Russian Mafia.” Sal referred to it as “disorganized crime.”
Sal depicts Felix or “Lex” destroying his professional life in a matter of minutes, or even seconds with the bar fight. “Lex blew up” but Sal is unable to describe exactly how it happened because he was outside at the time on the veranda. He portrays it as “Lex said something to somebody’s girlfriend, one thing led to another, and suddenly Lex smashed his margarita glass on the bar. Then he used one of the glass shards like a knife to cut the other broker’s face.” He describes a “crazed” and drunk Felix.
“Lex, come on, we called, “get out of here!”
“No, I’m staying,” Lex snarled. “I wanta kick his ass.”
“You already did. The guy’s bleeding. He needs an ambulance.”
“He deserved it,” Lex said. His brain was fogged with alcohol and I couldn’t get through to him. He was crazed, and the place was in an uproar because of what had happened. Paramedics were on their way, and so were the police.
My other friends and I were scrambling for cabs to get out before the police arrived, and we heard sirens as we left. Lex was still inside, and got arrested, thrown in jail and left there to sober up. He was convicted of felony assault, and a felony conviction cost him his broker’s license. No convicted felon can even be seen coming and going from a brokerage office. Lex’s career as a broker was over just as mine was beginning.”
Sal describes a Vermont skiing trip with Gruntal brokers where he met Walter Durchalter, or “Dutch.” Interestingly, after his first month in a broker role at Gruntal, he is let go. His performance was great, according to him, but Gruntal was being acquired and he was out the door. He went to Whale, a different brokerage firm, working with “Dicky”, one of the guys he met at the Southampton party where he met Felix. By the time it may be approximately 1991 or 1992, Sal and his wife felt like they were doing really well, but Sal comments on being invited to Ray Pagligio’s home and noting their apartment wouldn’t fit within one of the rooms in his residence. Sal describes Ray Rapaglia’s residence, and drops other recognizable names of people he met like Robert DeNiro and Donald Trump. It is difficult to approximate the year this is because he places “Lex” and his wife at Ray Pagliago’s residence, as well, and Felix wasn’t married in 1991 when the bar fight took place. The event at Ray’s was regarding a nightclub called Bacchus Sal and his wife had invested in some time prior, actually being asked about it the evening of Sater’s bar fight. This party had to have been in 1993 or 1994. Interestingly, there is a passage about Donald Trump’s bodyguard asking Sal and Felix’s wife for their phone numbers.
“We joined Lex and his wife, Lori, a beautiful blonde like Lynn. The two of them attracted the attention of Donald Trump, who apparently was always on the lookout for possible conquests. Soon, Trump’s bodyguard walked over to speak to Lori and Lynn.
'Hi',” he said. 'You two ladies are gorgeous and my employer, Mr. Trump,' he nodded back over his shoulder and paused for a moment to allow the dramatic impact to sink in, 'would like your names and phone numbers.'
Lynn and Lori both laughed at the same moment. You could see from the guy’s face that he wasn’t used to being laughed at, and Lynn reacted quickly.
'That’s terribly sweet,' she said with a smile. 'But we’re both married, and these are our husbands.' She looked at me, and at Lex, and Trump’s man retreated. I watched him walk back to Donald Trump and deliver the news. Just a statistic. I actually don’t think Trump was out to breakup anyone’s relationship.
'Are we supposed to be flattered?' Lynn asked.
'Look at it this way,' I said. 'He’s got good taste and enough sense to hit on the two most beautiful women in the room. He knows a good thing. Maybe that’s how he got so rich.' "
Sal said the day that changed his life was when “Lex” or Felix called him to see if he wanted to invest in any stock with “Candies Shoes, a company Whale had taken public six months earlier,” the company who produced cheap “fuck me” shoes, “so cheap you could buy a pair for a special evening, then throw them away and not care.” This was Sal’s introduction to Reg-S stock, a type of stock loophole that could be used to waive the regulation of not being able to sell stock for a period of 13 to 24 months in the U.S., but could be sold overseas.
The Reg S rule was for companies who needed to sell shares directly to an investor, whereas “regulators understood that there were times when an IPO launch was followed by a need to raise additional fast cash to keep the company afloat until it stabilized and began to grow” but it wasn’t meant to be misused or abused. However, brokers like Sal after learning this day regarding Reg-S loophole, would begin to use it as a “tool to be able to give additional financing or liquidity to companies that didn’t have it, sometimes for highly doubtful purposes.” Sal explains further he didn’t recognize at this time first learning of Reg-S loopholes, this could involve money laundering. But apparently he did as time went by.
When Felix or “Lex” in the book offered him the opportunity to make money on the Candies Shoes stocks and explained the Reg-S loophole, all Sal says he understood in the beginning was the sale of the stock would take place in the States and when the sale was complete, money would be deposited in an account for a wire transfer to Europe. This would mean the money would be parked in Europe, tax-free. Sal describes overseas after 41 days the stock was then sold for “whatever you could get for it” and then there would be cash back to the people who helped sell it. The issue was “getting the cash back into the United States tax-free” and he wasn’t clear on how “Lex” or Felix did it, Sal knew he would make money. He explains “Lex and Gene’s plan involved a friend and former business partner who was a master of Reg S” who had an account set up overseas he was using to buy restricted stock he owned, “either under his own name, or through an overseas corporation.”
Sal describes Wall Street in the book as “a land of accounting nightmares where everybody paid off everyone else and no one questioned side deals with which they were involved.” Sal found a buyer for the Candies shoes stock in Dan Tellach, a “trust fund baby” who “had the look of someone who had mastered Wall Street and finance.” Tellach purchased the whole block of stock, even after Sal explained to him it would be a cash deal. As he explains further in the book, “Taking cash payment for selling stock is illegal, but there it was. It seemed to make Dan hesitate, and then smile, but it didn’t stop him. He said he wanted to do it, and we put the deal through with him buying the whole piece at $3.25 a share. I only gave $.25 a share, which came to $50,000 for him, and kept the difference for myself. It worked out like this: 200,000 shares at $1.50 equals $300,000 --in cash. Wow! The deal had been made so casually that I didn’t fully realize what had taken place until a week later, when Lex called me to come see him. He had 35 stacks of $100 bills, each stack worth $10,000. Five of the stacks were for Dan. The remaining 30 were for me.
I walked out of there with $300,000 in cash in a brown paper bag. It was as much money as if I had grossed $1,200,000 in commissions because then I’d have had to split it with Whale and also pay the IRS. This money was mine to do what I wanted with it. I hadn’t bought any stock. I hadn’t made any trades. I had just arranged a deal on Reg S stock that Lex and Gene came up with and that Dan passed on to his clients.”
By what I can only determine is around 1992 or 1993 in the book, Sal covers how he realized over time he wanted to help take companies public, be part of the bridge financing, and have the potential to make millions instead of hundreds of thousands of dollars, and is enticed into joining Lex or rather, Felix, and Gene, being Gennady Klotsman, with the forming of a brokerage firm and becoming a partner. Gene is described in the book as “the one who did all the explaining and educating,” and as being “very convincing when he was explaining intricate and complicated points,” as well as being a “one-of-a-kind financial guy.” He’s also stated to be “so overweight he could be Stan Laurel of Laurel and Hardy” and wore bow ties, saying his motto was “Dress British, think Yiddish.” Sal explains Gene was drawn to any scam just like Lex or Felix was, and “seemed to have a genius for finding loopholes nobody else could see” or Sal said that’s at least how Felix had “sold” him to Sal as a potential partner for them. Gene did have an impressive history, though. He made full partnership in a large firm by the age of 23, made millions, started his own firm and then sold it for millions more, and was still not even 30. Despite earning millions, Sal said he squandered his fortune.
Sal got the idea for the name of their brokerage firm, White Rock Partners, a name which he said came to him “driving by the offices of the prestigious Blackstone Group.” They filed papers to open a registered business but they couldn’t operate until they were approved by NASD, the National Association of Securities Dealers. Before they began, they had to raise capital and agreed to each contribute a half a million dollars with the exception of Lex or Felix. Since he didn’t actually have a book (of clients), they let him off the hook.
It’s interesting to read the origin story of White Rock, four guys driving around in a Jeep talking on their cellphones. This had to have been late 1992 or early 1993. The later indictment for their fraud would state it began March of 1993, so this is the point where they’ve not even established a location for their office yet, nor been approved yet by NASD. They’ve acquired $1.5 million in capital but can’t officially begin business until they receive that official green light. Until that point, they’d drive around together making their calls. Sal would drive, Lex or Felix would ride shotgun, and Gene and Walt or “Dutch” would ride in the back.
Once they decided on an office location, it was “on the tip of the city a few blocks from Wall Street, at 17 State Street in a building where all our windows overlooked the Statue of Liberty.” Sal even admits as partners in White Rock the three of them, excluding Felix or Lex because of his felony from the bar fight in 1991, were applying to become broker-dealers. This meant they would need to meet all state and federal licensing requirements, and why they had Gene working with the lawyers. They were assumed to know and understand all the rules and laws, and he states “That was why we were all too aware we were committing crimes with some of our deals. But the way we saw it, no one that mattered to us was getting hurt, the big firms got away with it, and our people made a little extra under the table.”
“So far, the main accomplishment of our new company was creation of our own PPM - private placement - with three of the four bringing investors to back the venture. It should have taken less than a month for the licensing procedure to be completed. But Gene had a serious enemy - a member of the NASD self-regulatory board. A man named Dick Harrington had helped short players bring down Gene’s previous firm, before Harrington had gone to NASD to sit on the licensing committee. Gene had called him a penny-stock criminal, and that, we were sure, caused our license to be delayed for months. Meanwhile, we were itching to get started and decided to use Gene’s knowledge to do our first deal. It would be a reverse merger into a ‘shell.’ With a reverse merger, you buy a shell company, a defunct public firm. They can be bought for pennies. Then you reverse split the stock at a ratio that takes most of it off the market.”
Due to the fact this portion isn’t covered in the later indictment in March of 2000, it’s assumed this is prior to March 1993. He explains that in this way a “business that might need several years to go public can be acquired by the shell in exchange for the new stock and become effective immediately.”
Sal explains through the help of Abe Salaman, Gene found a company called Country World Casinos which seemed “perfect for a reverse shell deal” and would later involve property in Black Hawk, Colorado which was going to become a gambling resort. The stock could be purchased at one or two cents a share, more than it was really worth since there was no business and no market yet for the stock.
Despite some legal issues, the venture was “doable” and the guy behind it all was a friend of Abe’s. They could cut any deal they wanted, so they bought what they believed was a clean shell, with each partner contributing $23,000. They moved forward with a “100-to-1 reverse and then issued the new shares of Country World Casinos as a Reg S to our offshore companies.” Sal explains the players were Abe, who had sold them the shell, and his partner, Lynn Dixon. Lynn lived in Utah where the shell company had been incorporated, also where it was considered “the shell capital of the world” because the Utah state laws permitted “more flexible use of shells than most other states, including New York.” Grady Sanders was also involved, the owner of the Colorado property, and future chairman of the new company. Interestingly in the book Sal states the fact they met Sanders through Abe and Lynn should have been a “warning” because Grady was “supposedly involved with the CIA and allegedly a top lieutenant for Howard Hughes when Hughes was out to clean up Mob influence in Las Vegas” and also remarks, “Maybe Grady’s anti-Mob connections were authentic. He was not indicted.”
Grady needed capital to develop the casino property, which is described as “surrounded by snow-capped mountains” and the land being worth $12 to $16 million with nothing built on it. It was also the last property in the area on which a casino could be built and wasn’t being protected in some way. Sal thought the deal was perfect and believed in the potential of the gambling business, having been told by Donald Trump, “Casino gambling’s a growth business,” and “It’s an important area to get into.” The deal was to back Grady’s project of developing the casino into the shell company, “then do a Reg S with the money going to Europe.”
Grady, who needed to build a casino on the land, would receive a dollar for every share of stock sold, and because the stock would be free-trading within 41 days due to the Reg S loophole, Grady gave them 90 days to make their side of the deal good. They paid him with a promissory note and basically got the stock for free. Three million shares, as well as three million available to prepare the land and ensure it met the Environmental Protection Agency (EPA) standards. This would set up the second round of financing “in the form of a secondary offering.” Sal explained in the book, “The Reg S offering would assure that there would be plenty of money - approximately $20 million - for us to be able to take beyond what was legal if we could manipulate the stock to seven dollars per share.” So they contacted Beno Eton to act as their beard in Europe. He would be able to park the Reg S stocks through many of his offshore accounts and issue the notes for them. In exchange, Beno would receive a 10% cut of the profits. Basically, they were paying a dollar for stock which would be sold for six dollars through other existing brokers able to do business, because they still hadn’t received their NASD license. Each of those brokers would make between one to two dollars per share and the remaining money, between $3.50 and $4.00 per share, was for them to split among the partners. Each of them expected to bring in three to four million they would hide in overseas bank accounts.
In the book, Gene is described as receiving commitment from “a man named Henry Boxer, a convicted stock scamster.” Sal turned to a man named “Big Al” he was certain would want a million shares. Sal admits in the book they had full knowledge what they were doing was criminal. He just portrays it as something everyone was doing on Wall Street during this period. (If it ever even stopped.)
Here is a book excerpt as an example regarding this Country World Casino deal:
“At best the SEC considered this outsourcing of stock illegal. And if that wasn’t enough, there had been cash under the table too--what I was doing. Our clients became brokers and they had their clients. We were considered promoters of the stock. Later there would be issues of conflict of interest raised in regard to some of the actions that were common on the Street. But then, the deal I offered Al for handling the stock was legitimate in the sense that the company had a shot and was not a total scam. After all, MCI at one point was a cash deal, and so was Acclaim Entertainment. And a host of now-legitimate companies like Candies had cash promoters running around offering cash under the table.”
Sal had brought in “Big Al” to the deal but this ended up becoming a problem. Al’s firm wouldn’t allow him to take such a strong position in the stock but rather than give up the money, he had brought in a friend of his. When Sal went to meet Roy Ageloff, who owned his own firm, Andrew Bressman, who also owned his own firm (a different one) was also there. Roy’s office, Hanover-Sterling was in a nice location on Water Street, across from the South Street Seaport and a block from Wall Street.
But as Sal describes it, “I knew the type of players I was dealing with the moment I saw Roy’s firm. It was typical Brooklyn gangster-style, a place run by a Mob-backed hustler who had failed the broker’s test seven times before deciding to hire a guy to take the test for him. It was obvious Roy had spent zero money on furnishings. It was as though he had gone to a sale of used government office furnishings. No color, no personality, nothing to inspire an investor’s confidence. Instead, it was like the worst excesses of a boiler room operation.” Unfortunately for Sal, though Roy agreed to purchase 200,000 shares and hold them, he bought them and began dumping them within 24 hours. When Sal called him on it screaming, he denied it.
This is when Sal brought in Danny Persico, calling him up to tell him he was having problems with Roy. (Another occurrence I should point out is Sal runs into Rocco Basille, a guy who had been a cold-caller with him at Gruntal. Sal invited him to check out their new firm. Keep this in mind for later in the story.)
He describes his call to Danny as coming out of the blue. They hadn’t spoken in years after Sal had left the tile business Danny had helped front him capital to start, and Sal portrays the call as seeming to take Danny off guard. Sal explained to Danny Roy had flipped the stock and basically cost Sal $400,000. Danny agreed to go with Sal to talk to him.
In a story that seems to depict bad luck after bad luck, at the same time Sal is involving Danny because Roy was dumping stock he had just purchased, they were also finding out Grady wasn’t honest with them about the land for the casino. There were liens on it for legal reasons Sal explains weren’t clear to him. They turned it over to attorneys and became suspicious about what else they might not have been told, also asking an accountant to look at the books “after the first few million went in, and he gave us bad news.” Grady was spending around $75,000 a month on a corporate American Express card and had paid for his daughter’s wedding with company funds. They were also angry with Grady because investors had been flown out there and were unimpressed by the little work that was being done towards developing much of anything.
Yet despite all of this, because they were so focused on financial gain he explains they ignored warning signs. They did a Reg S to Beno’s offshore companies and brought the money back through a man named Aleks Paul, or rather “Don’t Fuck Around,” a nickname given to him after friends tried to prank him acting like their rental car had been carjacked. He just kept telling them “don’t fuck around” and the nickname stuck. He was a Russian diamond trader who “kept international banking accounts for buying diamonds from South Africa. He could wire money from account to account, and then buy diamonds for resale in the United States, leaving the money in Europe, unseen by the IRS.” Stones were sold for cash and this was a handy arrangement for the laundering of money. It was Gene and “Lex” or Felix who knew Aleks. While this seemed like an effective way to not bring money back into the States but instead small stones which could fit in the palm of a hand, this was in fact money laundering. And as Sal states in the book, …”the federal government was now running Operation Street Cleaner, a top-secret program to eliminate some of the corruption on Wall Street.”
When Sal met up with Danny to visit Roy’s office for dumping their stock, he explains Roy insisted Sal meet him at his office on Water Street, but they weren’t expecting him to walk in with Danny Persico. He wasn’t sure if Roy and his “goons” knew who Danny was, “but they understood his type. He had a cold piercing look to his eyes when he was pissed, and he was pissed by what he saw. The goons understood that. They might not have known his father and uncles were leaders of a major crime family, and that his father had been put away for his part in twelve Mob murders during one of the wars within the family. But they knew he was somebody they needed to respect.” Though Roy continued to insist to Danny and Sal he still owned the stock, he wouldn’t prove it. Sal describes Danny not even really having to utter any threat. He simply stated if Roy didn’t currently own the stock, he needed to buy it back. That was it, and they left. Sal figured the issue had been resolved.
Unfortunately again for Sal, this was not quite the case. It turned out Roy’s business was “connected to a Mob family closely linked with Danny’s,” which meant both crime families including Danny’s were profiting off Roy’s actions and at the end of the day, “his [Danny’s] position was not strong enough for anyone to worry about my [White Rock] firm going out of business.” White Rock was viewed as competition, “and probably as a good heist.”
Meanwhile, eight months after their initial application, NASD had finally approved their company and they moved into 17 State Street. Walter “Dutch” Durchalter and Sal were on the ninth floor and Gene and Lex (Felix) were in a smaller office on the fourth floor. Gene and Lex were managing the offshore accounts. Sal describes this period as “in the springtime of the coming bull market, before the high-flying Internet stocks that tripled overnight.” He explains how a recent product called “All-Man” had been a sports drink meant to rival Gatorade and had “been written up in both the business and sports sections of the newspapers.” Remarkably, even though the product was predicted to be “hot” and “would take a big market share” and the IPO raised $20 million, it turned out there was no product, no drink at all. “All-Man was nothing more than a former professional athlete with a fax machine, an answering machine, and an understanding of the insanity that was taking place.” He explains there “were lots of IPOs making money out of nothing” and that in 1993, over 90% of the 617 IPOs done by brokerage firms would fail.
Yet even though they still hadn’t recovered the $400,000 loss Roy had cost them and even after Danny helping with paying Roy a visit, Sal still describes White Rock as “thriving” and “seeing trading profits generated by … new recruits.” But the partners were still mad at Sal over doing the deal with Roy in the first place, so he still wanted to recover it. He paid yet another visit to Roy’s office and realized his firm was being targeted by other short-sellers and Roy’s firm was in serious trouble. Sal explains, “He didn’t have the money to buy enough to maintain the price. He had twenty-dollar stocks that he was supporting and two or three more that he had just brought public. The shorts were dumping stocks on him and he was trying to absorb it at an incredible rate to protect his positions.” After Sal realized he wasn’t going to recover his money, he figured he could at least grab one of Roy’s brokers. Yes, this takes us back to Rocco Bastille.
Rocco joined White Rock and brought along with him his “crew” which was essentially a group of kids from Brooklyn he called the “Brooklyn Assault Team,” which included his brother, Jack Bastille. Sal described Rocco as “not at all flamboyant. He gave the impression of stability and controlled aggressiveness in the business world. I was dumbfounded to discover that his father took his paycheck every month and let him keep $10,000 to piss away. He had skills that made him an asset everywhere.”
In another case of bad luck plaguing the White Rock/State Street story, Sal didn’t know when he purchased the summerhome in the Hamptons for his family from “Big Al” the FBI had already had it under surveillance because Al had received a visit from none other than John Gotti. Unbeknownst to Sal, the interest by the FBI intensified when they began “flashing money in ways we didn’t imagine would be noticed.” Sal considered himself the conservative partner not spending his money on “prostitutes and Versace” but instead spending it on real estate and luxury cars. At this point, he not only owned an Acura NSX, a Porsche 911, but also a 25th Anniversary Lamborghini.
His bad move in bringing Rocco Bastille into their firm became clear within days of his starting work there. Sal answered the phone and a very gangster voice told him, “You got the son-of-a-bitch working up there. He robbed from us so you owe us money.” It turned out Rocco had been running a scam at Roy’s firm after closing time called the “Black and Blue Market” and this was discovered about the time he had left and came to White Rock. Sal now knew Roy’s firm was connected to “a powerful family, a family which was now pressing Danny’s cousin to have Danny put pressure on me [Sal].” Notably though, Sal says he didn’t put enough thought into the phone call though because there was another pressing problem with Country World Casino again. They realized they were being shorted. This was the first time Sal personally, and White Rock, were facing short-selling attacks. There are a couple of ways short players hone in on a stock to target. They either get an insider tip the company is not as it is being portrayed, or there is an abrupt change in management which comes to the attention of the public. “Whatever the case, the short player feels he can manipulate the company into a downward spiral for his personal profit.”
Sal attributes Gene as being the one who realized the person who originally found them Country World, Abe Salaman, had given himself a million shares “buried in the fine print.” The convertible preferred stock had been converted into a million shares of common stock and the Country World stock was going down because it was being sold in increments Sal had been buying back each day to try to maintain the stock value. Gene called Abe and the following book excerpt will describe in Sal’s words how this escalated:
“He [Gene] then went on to say something that made Abe feel as though he was in physical danger, if not of being killed, certainly of being beaten. I never heard the threat, but there was no question that Gene, in his anger, had gone too far, as he had done before. His threat would come back to us in the form of a worse threat that I would be thrown out of a window. It would lead to a sit-down for Lex [Felix] with the New Jersey-Philly Mob.”
As the situation had progressively worsened, Sal was already in Country World for $4 million because he “had to to repay the brokers to re-buy it again” and he admits regardless of his motives in trying to maintain the stock, his “approach to moving the stock and to paying fees to the brokers supporting it fell into the categories of conspiracy and money laundering.” But after a while when the stock kept going further down, he made another error by deciding to just let it fall versus lose additional money supporting it. This became an error because “as it turned out, it led to the need for more sit-downs with factions in the Philly-New Jersey Mob that had a strong interest in the stock. By ending my support of the stock, their inside position on it dropped from a holding at $6 a share to pennies on the share. That gave them a lot of reason to be unhappy with us.”
Yes, this is where Frank Coppa, Sr. enters the story. A mob captain who was known as “Fat Frank,” who was a “skilled and notorious short player who brought along other short players.” You begin to understand why the book has the title it does when you read the passage in the book where he compares them to frogs and Coppa as the scorpion in this way:
“We didn’t know it, but the Country World situation led to their decision to work against us in every deal we entered. They said nothing and did nothing obvious. But once each new deal began to look like a winner, the scorpions struck, their stings slowly sinking each frog.”
Danny met with Sal and told him through another person, he knew Ron Bonero of the Bonero Brothers who were shorting the Country World stock. The name of the person was Turk Rambo, and he was a friend of the “family” and “the muscle behind Bonero.” After setting up a coffee shop meeting, they brought along Lex [Felix] and asked him to please ask Bonero if he could leave their stock alone. The subsequent perceived temporary reprieve is described by Sal as “short-lived.”
While Country World had been completely run as though not part of White Rock because they hadn’t been officially approved at that point to do business, the next venture was under the White Rock banner. It was “Holly Products,” a gambling equipment manufacturing company making the gaming tables used in casinos around the country. With the growing business from Indian reservation gambling, and places like Michigan and Windsor, Ontario and Niagara Falls, Canada expanding legislation for casinos, there was a growing demand for this type of equipment.
Yet they still were unable to work this one themselves because they didn’t get the necessary approval from the clearing firm and needed to build up additional capital. The deal was given to “The Brow” and his firm J. W. Barkley, and through a “secret trading agreement” both sides would benefit in cash off the transaction. The deal would net them a profit of $18 million to divy up as they wished. As Sal stated it, “The money was so great and the crime seemingly so minor that when a deal like this came up, a lot of brokers went for it, and now we had internal pasta boys and the original syndicate from Country World working together.”
Sal felt proud of the deal and believed Holly Products was solid, with actual reported revenues and earnings. Any sense of accomplishment or pride over the deal and money earned from it was dampered quickly by news the SEC was investigating Country World Casinos. Sal explains he had believed in Country World initially because of the land and the fact “both Donald Trump’s real estate people and the owners of the Tropicana wanted that land” but what he didn’t know at the time was the title of the property was in question and due to that “no real plans for the development” which was what the stock had been based on initially - the future plans of the project and land.
They learned later that “Grady had this convoluted scam going where he’d take the property, claim to be developing it, and then run it into bankruptcy. He had a different company established that he’d use to buy the bankrupted property, then start the scam all over again.” The scam of Grady’s had been going on for so long it had become difficult to establish who was the owner of what, yet it would be clear “money was being earned through milking investors in a casino that would not be built, bankrupting the operation, selling it, and starting over again with new money.” They were sent a request by the SEC in Colorado for a hearing to answer questions regarding Country World. Sal describes feeling relieved the SEC investigator asking questions in the hearing “seemed inexperienced. He asked questions about Country World Casinos, about how the deal was structured, who the various owners might be. He asked about the offshore stock and the Reg S information, and we answered. That’s not to say we answered honestly even though we were under oath. Our lights might have mattered if the SEC man had known what he was doing. But either he was not as skilled as he thought or his superious didn’t regard the case as being as important as he did. Because a month or two later we read about him suing the SEC for discrimination because they never took his cases seriously. Whatever the reasons, there were no repercussions from the SEC at that time.”
Sal was already angry with Abe Salaman and Grady Sanders for “perpetuating the irregularities that had led the SEC to our door,” and everyone being angry with each other at this point. Gene making another threatening remark to Abe about their knowing it was him who was continuing to dump Country World stock led to Sal receiving yet another threatening phone call. This is where he’s threatened with being thrown out of a window.
“We’re from Philadelphia and friends of Abe’s. We’re coming there and we’re going to throw you out a window to prove a point to those Russians who insulted a friend of mine, and there’s no way back from this.”
Sal thought the issue was how they had spoken to Abe, and didn’t realize it also tied into supporting the Country World stock which he had let drop and was no longer continuing to buy back. But the phone call scared Sal. When he told Lex [Felix] about it, he thought they needed to use someone other than Danny Persico. Sal explains “Lex really did not like Danny’s family. He never told me why, but he was adamant. Instead, he went to his father, a well-known Russian gangster and ally of the Wiseguys.” Sal explains Lex’s father “was gravely disappointed that his son came to him to use his Mob connections. He had hoped his son was prospering legitimately on Wall Street and he was sorry to hear about Mob players, sit-downs, and other problems.” Regardless, he wasn’t going to refuse Lex [Felix] and arranged for a man by the name of “Ernest Montevecchi” also known as “Butchie Blue Eyes” to represent Lex [Felix] and the firm.
The man who had threatened Sal on the phone was “represented by Frank Coppa, Sr.” who was a captain in the Bonanno family, whereas “Butchie Blue Eyes” or Ernest Montevecchi was a soldier in the Genovese family. Yet apparently a deal was struck. Butchie told Frank when they met the stock was actually his and not Abe’s, that Abe owed him the money, and the stock needed to be purchased back by them but he was willing to permit it to be at a lower price, “so everyone had a good deal.” Butchie was able to get Frank to back down regarding the threat to Sal. But at this point Butchie became permanently involved. He recognized the money being made on Wall Street and decided to make White Rock a “white elephant present” for two guys who helped him resolve issues. Their names would show up in the later indictment: Eugene “Big Gene” Lombardo and Robert DePaolo. The two would “watch what was going on in our office and report to Butchie. They would make sure the agreements in the sit-downs were followed and that the right people would get paid out of the final sale of the casino stock.”
Sammy “The Bull” Gravano mug shot, 1991
Around this same time, Sal states he was “able to establish that Country World stock coming back was from A.R. Baron & Co. owner Andrew Bressman.” Sal had called Andrew furious and called him on it. Bressman agreed to pay Sal $150,000 in cash and owe a favor, so Sal took the deal and cut his losses. He sent over John Diorio to collect the money from Andrew, a guy who was a friend of Danny’s and “an ex-cop on medical pension.”
The following book excerpt gives a good perspective of what it was like on Wall Street and behind the scenes during this time:
“John went over to Bressman’s office and entered without saying a word, figuring the place was bugged. That was smart, because by this time, it seemed like everyone on the street was watching everyone else. There were Feds, cops, members of the Mob, and the brokerage house owners themselves. Diorio wasn’t about to be caught on anyone’s wire, so he went in and gestured that he was there for the money. He showed them what he wanted, who he worked for, and when someone tried to get him to talk, he just grunted. He wasn’t going to commit himself to anything that could be used against him. So he got the money and left clean. I realized that on Wall Street, there was far less loyalty than there was on the streets of Brooklyn.”
Interestingly, at this point the Country World board of directors had hired a big company in Las Vegas to “come in and bail them out and sit on the board as well.” Sal and his partners, meaning Lex [Felix], Gennady “Gene” Klotsman, and Walter “Dutch” Durchalter, decided as board members they had a right to attend the board meeting. Sal flew to Colorado and was initially refused entrance to the meeting by the secretary. Sal had to push himself past her to get into the meeting and address those in attendance.
The following excerpt from the book explains how Sal used the firm’s existing ownership of shares in Country World to push its board into purchasing shares of Holly Products.
“‘Guys, I represent all the voting shares that the public owns’, I said. ‘I own every share of this company in its float, and I control all the warrants. I control all the common stock. I think I had better be sitting in this meeting.’
Looking more calm and controlled than I felt, I sat down in an empty chair at the boardroom table. Then I continued.
‘Right now you know that the stock is decimated,’ I said. ‘The company hasn’t done anything it’s supposed to do, and quite frankly, the lawsuits are going to start hitting.’
That had a big effect. Systematically, one by one, every board member put his tail between his legs and resigned. But I wasn’t finished.
‘I’m going to vote at the current market price-twenty cents a share-a million dollars worth of stock to Holly Products,’ I said.
I meant what I said, and I used the control I had to push out the former president and management. He was furious and went to his lawyers. But I was in the right and we got the property back, putting it under control of Holly Products.”
The firm promised Larry Berman the building of the casino would be funded; they “would float a small secondary to give him enough money to prep it, to get it going, and then go for a state bond issuance to build a casino.” Colorado was willing to float a bond to develop a $60 million dollar casino there and they really wanted to make it work. So the two companies became one, Country World and Holly Products, and “clients were getting shares of Holly Products in lieu of the Country World stock.”
Another key perspective of what it was like during this period comes from the following details within this excerpt:
“The biggest problem was that my firm was a corporation in which it seemed as though each person had a scam of his own, in the midst of a stock market that was insane. When I got involved with the Street in 1990, the Dow was at 2,513 and the Nasdaq at 410. By the time we opened our firm in August, ‘93, the Dow was 3,681 and Nasdaq was 742. It was the beginning of a bull market that would take the Dow close to 12,000 and the Nasdaq to 7,000.”
Sal portrays Gene especially as hustling however and wherever he could, a guy who was only ever in it for himself. Sal explains he had “maintained ties with the Russian Mafia, the organized crime underbelly of what had been the Soviet Union. The break-up of the USSR in 1991 meant financial opportunities for rogues. Dishonest military personnel stole weapons and sold them to international terrorists with the Russian Mafia acting as go-betweens. Russian leaders were on the payroll and often brought into investment scams being worked throughout the world.”
It is at this point in the book when Sal Lauria mentions Gene’s ties to the Russian Mafia in the fallen Soviet Union where the deal involving Stinger missiles is brought up. Sal writes, “Eventually Gene and Lex [Felix] would become involved with deals that ranged from a Russian leader’s effort to buy an American stock brokerage firm to obtaining missiles from the hands of Osama bin Laden.” Sal explains White Rock for Gene was “just another vehicle for increasing his earnings.”
We know this began later though, because Sal goes on to explain Felix entering prison for the bar fight which occurred in 1991. We can assume by this point we have reached the time of approximately the middle of 1994 because we know from New York prison records Felix Sater began his 18-month sentence in June of 1994, and was released 15 months later in September of 1995.
Sal writes his feelings on how all this went down by stating, “The judge refused to listen to all the arguments on Lex’s behalf against prison time and sentenced him to serve 18 months. It’s likely that he would not have gone to jail if his father wasn’t a gangster. Before the trial, he had been offered a deal where he’d get no jail, no probation, but would lose his broker’s license. He hadn’t thought the charges were bad enough for him to lose his license and that was why he had fought it. That was a mistake.”
Sal writes it seemed like because it was in the early days of the Mob becoming connected to Wall Street, the prosecutor was trying to send a message through Felix or Lex. Sal said the offshore accounts and stock positions were Lex’s [Felix] responsibility but they figured if they ran into any problems, they could go visit him in prison.
There was still the outstanding issue of the money Roy was telling the Mob had been scammed by Rocco. Danny came to see Sal over it and Sal explained he felt it had all taken place prior to Rocco coming to White Rock. He didn’t see why it was the firm’s problem or why Danny’s cousin “Allie Boy” who was currently head of the Persico family felt Sal owed it back to them. Danny was telling Sal he needed to fire Rocco. Sal disagreed. While Sal and Danny’s childhood friendship withstood the strain, Danny’s cousin “Allie Boy” grew a serious dislike for Sal and the White Rock firm. He had formed his own brokerage firm, Toluca Pacific, believing he could make a lot of money with IPOs. Toluca had opened across the street from them and began to steal White Rock’s brokers and accounts. Toluca was also shorting White Rock’s stock whenever they could, so Sal asked Danny about it. Danny told him the man running the firm was Alain Chelem, otherwise known as “Plug Head” because of a pretty terrible hair transplant job.
Interestingly, in another passage from the book we learn how the guns ended up in the storage locker in New York. The documents aren’t mentioned yet, though. Apparently Lex [Felix] went to a guy named Vlad’s house, another guy with the firm (as well as a very heavy drug user) and because he was making threats, took all of his guns and rented the locker, paying six months in advance. It’s unclear if this is back to being prior to when Lex [Felix] entered prison for the bar fight, or if this is already taking place after he’s been released from prison, or essentially after September 1995.
“Frightened, yet believing Vlad’s threats would not be carried out while he was so high, Lex went to Vlad’s house to look for weapons. He found several guns that he knew were dangerous beyond their power to kill. They were dirty: unregistered guns that had been used in crimes, and they could put Vlad, or anyone else possessing them, away for life. The guns made anyone with access to them a suspect. Lex [Felix] didn’t think of any of this. He just stuffed the guns in a duffel bag and took them to a self-storage yard, rented a locker and paid the rent six months in advance.”
Unfortunately again for everyone involved with White Rock, Vlad’s most recent drug deal had been captured on video because his dealer had been put under surveillance. Due to Vlad’s history of offenses and what he was facing after arrest for possession, he agreed to cooperate with the authorities. That was when “Operation Street Cleaner became involved and Vlad became one of the first of the inside players on Wall Street to wear a wire.”
The first person to be taken down by Vlad was Aleks Paul or the “Don’t Fuck Around” diamond money-laundering contact. Vlad had arranged a dinner with Aleks at a Marriott in downtown Manhattan. Unbeknownst to Aleks, the meal was “under the eyes and ears of federal undercover agents. By this time the Feds had men undercover as bankers, investors, whatever it took.” Vlad asked Aleks if he could do more of his “usual service” meaning money laundering, and Aleks agreed on recording, and perhaps due to the fact he was drinking a $600 bottle of Petrus wine and feeling no pain, he also proceeded to discuss “notable money laundering capers he had done” even going so far as listing dates with Feds only a few tables away, capturing all of it. It was a great night for Operation Street Cleaner.
Due to the fact this book can be checked out online for free and it is 17 years old at this point, instead of paraphrasing where Sal decides to create a syndicate, Sal will be quoted in entirety here with what will likely be the longest quoted excerpt:
“I decided to create a syndicate of three stock brokerage houses that my partners and I would basically control. The brokers, seemingly acting independently of the other firms, would all work together to control the stock and manipulate the market. Buying and selling would be done among the brokers’ clients, giving the illusion of broader interest in our chosen stock than actually existed.
The three-office syndicate violated the rules of both NASDAQ and the New York Stock Exchange. No brokerage house owner could own more than a 10 percent share of another firm without providing full disclosure of that fact. Once the ownership exceeded ten percent, the brokerage firms involved had to handle stock just like a brokerage firm with multiple offices.
My concept for the syndicate involved bringing in two companies run by two of my cousins, but when I broached the idea, neither cousin was enthusiastic. One cousin was my age, the other was younger. Both knew I broke the rules, that I gave guys cash, and that I did offshore stuff that was either blatantly or semi-crooked, depending on how you looked at it. They made their money following the rules and they didn’t want to change. At least not until they seriously looked at how much I was making and how much they were making. They could see that I was garnering millions, and my numbers were going up, while their incomes were relatively stagnant. I asked a second time, and the second time they agreed. They didn’t want to commit crimes on Wall Street, but they did want the money.
Both cousins quit their ‘straight’ brokerage house jobs with a guarantee of financial support from my partners and me. We would help structure the new businessines, provide the $100,000 it cost to write a business plan, supply the money they needed to build their books, aid them in raising capital and assist them with the cost of legal services, accounting, printing, and related expenses. In exchange, I would have forty percent of each firm.
We also had deals planned with a third brokerage house that was run by three of Danny’s friends, guys who were friends from the street in Brooklyn, but not ‘soldiers’ connected with the organized crime family.
The idea of opening these satellite companies was so that we could do multiple deals within our built-in syndicate group without having outside players back-dooring their stocks to us. We wanted to anticipate success in the partnership by spreading the wealth around, which was why we gave all the new players a piece of Holly Products."
If it is even possible to have this entire saga of White Rock become more amusing in its glory of running bad luck for guys committing crimes, there’s also what happens to Gene when the examiner from NASDAQ comes in and he “thought she was an assistant and excused her from the room.” Apparently, Gene being listed as the Chairman and Sal as Co-Chairman was already a “red flag” because Gene wasn’t popular with NASDAQ. Matters were made worse when, in an attempt to make up for his prior error, sent the woman an expensive rose bouquet. As Sal explains, “That made her really mad. First, he had insulted her, then he had made her think he was trying to bribe her. NASDAQ cranked up a full audit of their operations.” Sal describes it as “totally fruitless,” though, because the illegal part of their activities was the sale of inside positions, meaning retaining stock not disclosed publicly. Yet even this was legal had Sal waited the full thirteen months as he admits in the book. Instead, the Reg S loophole was used. He explains, “What we did was illegal because we brought the money back in cash, failed to disclose the ownership, and we didn’t wait the thirteen months.”
The next stock of significance to be noted in the book was brought to them as a tip from a guy named Al Nagel, who was “increasingly hanging around the firm.” The stock was for a company named US Bridge of New York, “a firm making good money repairing bridges and other critical public facilities that were deteriorating with age. Throughout the United States and especially in the East and Midwest, bridges had been built to last with little more than routine maintenance for 25 years, 50 years, or longer.” Joe Polito was the Chairman of US Bridge New York.
At this point, Sal explains “Dutch” or Walter Durchalter had left resenting the fact Lex [Felix] had been cut into deals while he was in prison. They bought him out and asked John “The Duke” Doukas, the guy who gave Sal his first job at Gruntal, to take over Walt or “Dutch’s” spot. Sal notes Doukas in the book as being opposed to Gene and Lex [Felix] so-called “penchant for shady dealing” and he wanted to broaden White Rock to a larger, even more successful firm. The name was changed to State Street and their offices moved to 40 Wall Street, the World Trade Center. Sal describes the rent as being reasonable and the security being great there because this was shortly following the 1993 bombing which took place there. Visitors being required to show ID was an added benefit to discouraging most of the Mob element from bothering them.
During this time they successfully took US Bridge public and Sal notes because it was their only major deal at that moment, “it was easy to track and trade.” Then it gets interesting when Sal writes the “US Bridge accountant took over and then he went nuts, too. We caught him embezzling a million dollars.”
The second IPO Sal had planned for White Rock after US Bridge was Cable Shoes, a company which was manufacturing expensive men’s shoes. “The shoe business was a profitable niche market and Cable, though never pretentious, was a leader in the field with forty million dollars in sales.” Sal explains this as another deal which could have been a legitimate winner had he handled it “straight” but they didn’t. He states “my impatience and greed cost me a lot more than I gained.”
At this point in the book, they’ve moved to a new location and renamed the company from White Rock to State Street and it’s assumed to be around late 1995, when Lex [Felix] should be out of prison and likely in some form of probation period.
Excerpt:
“The more boldly we entered the world of money laundering, pump and dump, and other frauds, the more brazenly we advertised our presence on the Street. By the time we moved our offices to the World Trade Center, Gene and Lex had taken the penthouse floor of the new Donald Trump Building at 40 Wall Street. The Duke had made some of the decisions in appointing our main offices in the WTC, and he liked nothing but the best. The office walls were mahogany, the entryway was granite and the two corner offices had built-in bars. The furniture was among the finest available for offices. By the time all the furniture was installed, The Duke had spent approximately $700,000."
The Country World Casino deal was technically before they even received the approval for their White Rock firm, and US Bridge had been their last deal in the old offices before their move to 40 Wall Street and renaming of the company. Cable Shoes would be the first deal in the new office space. To signal the change, Sal agreed to The Duke’s terms of handling things in a more legal way, “no cash under the table for selling the shoe company IPO.” Gene and Lex [Felix] were who had arranged for White Rock/State Street “to take over the shoe company IPO for a $300,000 payout to Fat Frank Coppa, Sr. the notorious short player who controlled a brokerage firm that had signed the deal for the Cable Shoes IPO.”
Sal believed there was an agreement but then Fat Frank called. First to congratulate Sal on getting the shoe deal, but then to say he wanted 75,000 shares to help “some brokers who had their own firm and needed some start-up stock.” Sal politely told him he couldn’t because the deal was oversold and Sal needed the shares he had. Sal explains, “I was figuring I could slip him a few thousand shares, but 75,000 was out of the question.” Fat Frank then told Sal he was going to be sending over his son, Frank Coppa, Jr., to pitch a deal on a chicken franchise. Frank Jr. owned a couple chicken restaurants, wanted to franchise, and Fat Frank, the father, wanted White Rock/State Street to finance it.
Sal explains this chicken deal “was typical of the way a number of business owners were thinking in the 1990s” and “franchises were popular before stocks in the electronics industry and Internet businesses took off.” In what would be later reminiscent of how Bayrock would work to license the Trump brand on real estate, Sal states, “The idea was that someone with a viable business could get rich leasing the idea to others using the original business’s name, sharing the advertising expense and getting the right to utilize whatever made the business unique.”
When they said they weren’t interested in the chicken franchise because they were already starting to look at tech companies, "Fat Frank" called Sal and asked to see him, requesting they meet at a downtown hotel. He mentioned to Sal how much money White Rock/State Street was making in a way that made Sal realize he was suggesting they were vulnerable to short traders. Because Sal knew Fat Frank was a “serious Mob player,” he called Danny for advice on how to deal with him. Danny told Sal to be firm if he wasn’t interested and not to back down with him.
Sal met with Fat Frank and was amazed by his size. He had assumed he was fat given the name, but “he was a lot fatter than I had imagined. He had a cigar in his hand and he weighed about four hundred pounds. He looked like the actor Danny DeVito blown up to maybe six times his size.”
The next part of the book will also be quoted in full context from the book because it explains how Lex [Felix] directly came into contact with Fat Frank.
“His son Frank Jr. was with him and I said hello to his son first, since I already knew him. Then I said hello to Frank Coppa, Sr. He didn’t say hello back. He just looked at me. Then he said:
‘Hey, kid, you know what I do?’
‘Yeah,’ I said. ‘You’re a short player.’
‘So why you telling my son you don’t want to do his deal?’
‘So why should I?’ I asked him. ‘What are you gonna do, short me?’
‘You’re a good target,’ he said, puffing his cigar. ‘You’ve got five million dollars in capital.’
All of a sudden my feelings changed. This guy had information about me that he had no legitimate access to. He had gotten inside information before the meeting, the kind of information the stock market investigators were not likely to have.
‘Five million dollars in capital,’ Coppa said again. ‘I could take you out tomorrow. I could short you down till you’re zero.’
I wasn’t going to show that I was scared. I knew I could start a business again if this one went down, and I understood there would be times when a broker’s book or the whole house could blow up. But I didn’t want my new business destroyed because a guy wanted to boost his son’s income.
‘I don’t want to do a chicken franchise,’ I said. ‘It doesn’t look like a good deal to me.’
That’s when he gave me a look, the kind of look I had seen in the eyes of mobsters who had absolute power, and knew they had the absolute ability to wield it. His son knew it, too, and you could see the smug confidence on the son’s face.
‘Here’s what,’ Coppa told me. ‘Not only are you going to do the chicken deal, but you’re also going to give me seventy-five thousand shares of your shoe deal.’
This was the classic way Mob muscle is wielded. A bad deal is offered to someone who doesn’t really have much choice but to take it. Out of a sense of self-respect, he turns the deal down, thinking he has the free will and right to do so. Then the man he’s dealing with shows his power, and makes the man another offer - a much worse one. If he’s smart, the man takes the second offer, because the next one will be even worse.
The chicken deal was bad enough for me. But giving this guy 75,000 shares of stock in the shoe deal was a disaster. To do that, I would have to take the stock away from somebody - a good client or a good broker.
‘I can’t give you seventy-five thousand shares,’ I said.
‘I didn’t ask you if you were interested,’ Frank Sr. said, getting up, the meeting over. ‘I told you that’s the deal.’ Then he and his son left.
We had already paid Coppa $300,000 to turn over the shoe deal and this a shakedown. We both knew that the shoe stock was going to go from five to fifteen. That would mean giving him $750,000, on top of the $300,000 we had already given him. I was furious about this and so was Lex [Felix]. The threat had been clear: if we didn’t give him $750,000 worth of stock in the shoe company IPO, he would destroy us by shorting.
Lex and I talked it over and it was clear that I was in a corner. If I didn’t give in to Frank’s deal, he would crush US Bridge, which was the only stock I cared about. I really didn’t want to hurt the people involved.
Lex was angrier than I was, and being a more volatile guy than I am, he set up another meeting with Frank, and threatened him right back. He wasn’t talking idly, either. He had his father, and he also had Butchie Blue Eyes behind him.
‘Listen, you fat fuck,’ Lex told him, right away. ‘Don’t ever threaten my partner again, or you’ll find yourself going out a window.’ Frank knew Lex was someone to be reckoned with.
‘Calm down, kid,’ he told Lex. ‘We’ll work something out.’
Lex was out for blood. That was when I realized once again that I was trying to hold up the last deal for the benefit of the next deal. If US Bridge went down under a short attack, I would have had a hard time selling the shoe deal. I told Lex that the chicken deal was out of the question, but I’d look at the shoe stock and see what I could come up with to satisfy Frank and keep him off us.”
It’s around this time Sal mentions in this book he co-authored with David Barry that they had hired a professional to come in and sweep their offices for listening devices or bugs. He couldn’t figure out how Fat Frank knew their firm had $5 million in capital. Sal explains even if Frank had a source, this was information he likely shouldn’t have had access to, though Sal does state he considered if somehow Frank had gained access to the monthly reports they had to send NASDAQ to show how much capital they had.
But the professional sweeper did find a listening device in the trading operations phone “where all the money and the transactions happen.” It was the phone Sal used to give the go ahead to buy or sell a stock and also near where they reconciled their stock positions every morning with the clearing firm. They wanted to determine if the bug was a government issue and concluded after some investigation it was a bug sold for professionals outside the government with no way of tracing it back to who had been listening. Not only was the device recording every phone call, it was also listening in to the room as well.
By the time Sal has been dealing with US Bridge and Cable Shoes and the issues with Frank Coppa, Sr and Jr, as well as another stock called Fun-Tyme, they are leaving for their vacation in France. The one which initially started the beginning of the book. The vacation where Lex [Felix] will later call them in a panic. At this point, it is likely to be July or August of 1996. Sal tells Lex to keep a low profile while he’s keeping an eye on what’s going on at the firm because he’s not supposed to be in their office or any brokerage office after losing his license.
The indictment which comes later in March 2000 states White Rock/State Street collapsed in September 1996, so the following excerpt is likely to be around this timeframe, perhaps a little earlier or later.
“The Federal authorities were increasingly a presence on Wall Street. Numerous brokers were being indicted and others were wearing broadcast equipment to help the FBI and others build cases against still more firms. In that climate, Gene and Lex decided to go to Russia. Things were hot in the former Soviet Union. The privatization of all the industry over there meant lots of opportunity to make money.”
Sal describes a “shredding party” he, Gene and Lex had to get rid of any corporate documents leaving a paper trail. Then there comes this interesting passage in the book where Lex [Felix] without the knowledge of any other partners at the firm including Sal kept the documents regarding the offshore accounts. “Since the type of money laundering and manipulations being done overseas were legal, Lex saw no reason not to save some documents from the shredder. He did not think about the fact that if they were found in the United States, they were still proof of U.S. laws being broken.” He took the docs to the storage locker which already had the guns and “didn’t tell the rest of us what he had done.” ???
Sal explains if he had told them of his intentions, “we would have stopped him. There was no reason why critical details such as account numbers couldn’t have been written separately, perhaps in code, and placed where they couldn’t come back to create problems. By saving the paperwork, he was preserving evidence of criminal actions. A storage box lease is over when the time expires. Then the lock may legally be broken, the box opened, and the contents confiscated for sale. Lex had leased the box for six months and he didn’t stop to think that the trip to Russia he was planning was going to last longer than that.”
Sal describes this period of time by what is likely the fall of 1996 as it being “doubtful to me that there was any brokerage house on Wall Street that was completely clean. Whether they knew it or not, the largest, most respected firms still had individual brokers who were linked with organized crime. There is just too much money in the short playing, in the pump and dump schemes, in the secret world of bridge financing, to keep them away.”
It’s difficult to establish if David Barry, the co-author, was purposely vague on establishing years and/or dates certain events took place with certain people, companies and stocks, or if Sal himself assisting in the writing of this book was vague or simply didn’t remember. Or perhaps neither were concerned with establishing a clear timeline of events and more focused on the telling of the overall story. But while we established in prior pages of the book, Gene and Lex had left for Russia and assumed this was close to, or right after the collapse of White Rock/State Street in Sept 1996, another passage comes not much further on stating Lex [Felix] was being threatened.
Since there’s no mention he came back to the States at all after leaving for Russia with Gene, this must have been prior to Lex [Felix] leaving for Russia with Gene.
Excerpt:
“Lex was also having problems. Butchie Blue Eyes had supposedly guaranteed the US Bridge bonding and the $100,000 fee that was never returned. Now the Mob wanted it back, and the guy collecting for Joe Polito was Al Garafola, his Wiseguy partner, the brother-in-law of Sammy ‘the Bull’ Gravano. Sammy the Bull was the confessed murderer who was given a new life in Arizona as a result of testimony that sent John Gotti, then head of the Gambino organized crime family, to jail for life. Al Garafola told Butchie that if Lex didn’t pay, he’d be chopped into little pieces and I’d still have to come up with the cash. This was a threat to be taken very, very seriously. Once again, there was a sit-down. The two guys who took the money were on the lam so it was a very tense time. As it turned out, the matter was never resolved and the money was never returned.”
It becomes a little more hazy when only a couple paragraphs later Sal is writing in his voice about all three of them leaving for Russia, though earlier he had indicated only Gene and Lex had initially gone there. Sal explains Boris Yeltsin is supposedly a friend of Gene’s family.
Excerpt:
“We all began preparing to leave the United States and none of us thought about the storage box as we planned our trip. We were envisioning deals in Russia, where Gene had established a business base on a trip to see Russian President Boris Yeltsin, supposedly a friend of Gene’s family. Yeltsin had risen to power as part of the democracy movement encouraged by Mikhail Gorbachev, then the leader of the former USSR. Gene’s planned get-together in Russia was a strictly capitalistic meeting to discuss the possible acquisition of Shearson Lehman, which was up for sale. There was no set price, though Gene had learned that an offer of $780 million would likely be accepted. He felt he could raise the money with the help of Yeltsin and a man they called the Russian Godfather, who was put in jail weeks after Gene had wined and dined him. There were plenty of very wealthy Russians, some of them from the old Communist system where stealing had been a way of life for the privileged, and some of them new millionaires becoming rich under the democracy movement. Yeltsin knew them all or could find people to help, and Gene planned to cut him in for a piece of the action.
Gene had flown to Moscow and gotten a room in a hotel next to the parliament building known as the Russian ‘White House.’ He went to bed unaware that a take-over plot had begun. Then members of the State Committee called a press conference. The plot’s leaders came across as drunk and incompetent.”
It’s unclear why another few brief paragraphs about Gene coming out from his hotel room and helping the Russians fight against the Communists and for democracy in Russia was important to the story (or Gene's interest in Shearson Lehman) until later when Sal explains,”the pro-democracy forces remembered the courage of the Russian-American, living in the United States, who had left his hotel to join them in the streets. It was a reputation that mattered when he went back much later with Lex, and I joined them as our business collapsed.”
Sal explains another plus to having Gene and Lex in Russia on top of the business deals they could is the fact they could be the “scapegoats” for any problem’s Sal’s cousin could run into with the authorities. Sal told his cousin to protect them, “claim ignorance and say that the two Russians did it all.” Sal hoped this might buy time without hurting any of them because thought it seems to have taken Sal too much time to realize it he admits to “gradually realizing that the FBI and other investigators involved with Operation Street Cleaner had penetrated all [his] business operations to one degree or another.“ Sal felt his connections to Danny Persico had made his business seem “Mob owned or Mob-controlled” but felt a little comfortable he could leave the country more easily not yet being an American citizen. Though he indicates he was raising his daughters as Americans, he “had never taken out the paperwork necessary to become a citizen.” At the same time, he also worried about being deported.
When Sal finally gets to the point where he’s stating he flew to Moscow to meet Gene and Lex, he explains Gene and Lex had “established the cover story that were were New York bankers coming to do financing deals in Russia.” He says they also made contacts with pharmacists to supply them with Viagra. He had been shipping some to Gene and Lex and also packed a lot to bring with them on the flight there. It wasn’t a drug Russians had access to, so they were selling it for profit. Sal reiterates Gene’s father was a major businessman with “extensive agricultural holdings through which he subsidized farmers” and that Lex’s father was a “notorious, politically connected gangster who was high up on the food chain.” He explains due to those connections, they were able to set up meetings with the chairmen of top banks during a period of “time when certain Russian banks were floating bonds in the U.S. and London.”
Sal says he didn’t realize how connected Gene and Lex really were in Moscow until he got off the plane, grabbed his luggage, and found an official car waiting for him, “the style you see rolling Manhattan streets on the way to the United Nations - a black Mercedes-Benz with flags on the hood, as if I were a head of state or a diplomat.” They were doing business with banks, in particular Most Bank, “one of the largest and owned by a man who owned the majority of the media in Russia.”
(This is likely to have been Vladimir Gusinsky, but I am not certain.)
They adopted the customs of the people they were talking deals with, sitting in the Russian bathhouses, met with Russian stars and were “dealing with ex-KGB generals and with the elite of Russian society, and when Lex felt confident with one of these officials, he would tell them he had a problem in the U.S., and ask for help.” Sal said he was “carefully protected” during the three months he was in Moscow and while he was there he realized how big a deal oil was in Russia. The fighting in Chechnya was in large part due to “the pipeline that feeds Russian crude oil to the ports where the ships come.” He also talks about how they were “working on doing a pipeline through Afghanistan as well. The Chechnya war was affected by oil and how to deliver it to the ships in warm water harbors. All of their ports in the north were frozen solid in winter.”
Sal traveled back to the States and met with a man named Leonardo who had an office just off Fifth Avenue at Rockefeller Center. He was an oil trader who had married into one of the wealthy Arab families, so Sal met him with a proposition, saying there were a lot of oil projects he could look into for him if he was interested. Sal suggested Leonardo invest $100,000 for him to travel back to Russia and inquire regarding oil field deals. They established a joint company, each contributing $100,000. He flew back to Russia to their apartment he shared with Gene and Lex and explains this is when he first “learned that Lex had a scheme that might be able to get us out of trouble with the FBI.”
Sal describes Lex’s [Felix] contacts in Russia in this way: (book excerpt)
“Lex was always hustling and scheming, and his contacts in Russia were the same kind of contacts he had in the United States. The people he knew to approach about deals were crooks. The difference was that in Russia, his crooked contacts were links between Russian organized crime, the Russian military, the KGB, and operatives who played both ways, or sometimes three ways in that shady, dangerous domain. Russian gangsters dealt in oil, currency, drugs and goods, which is not unlike gangsters in other nations. But Russian gangsters in Russia also had war material to peddle. Not just guns, like arms dealers in other parts of the world. The Russian military structure had all but collapsed with the fall of the Communist government, and not only weapons but also entire weapons systems were available on the black market.
Tanks, fighter planes, and missiles were all for sale, and so were missile guidance control and other radar systems. And not obsolete systems junked by some former Soviet ‘republic’ or satellite regime that had never been able to maintain them. This equipment was state-of-the-art. There were even nuclear devices to be had for the right amount of money, or so it was rumored.
This was the rich hunting ground where Lex was gunning for deals, a Russian black-market weaponry expanse unlike any that ever existed before. In this he saw opportunities not just for making profits, but for building a hand that the three of us might be able to play against the American authorities in the cases coming down against us. Lex believed he could find something on the weapons black market that would help the U.S. security position, and perhaps help us with our legal problems at the same time. He made an initial contact with someone connected to the Central Intelligence Agency. He sounded out the possibility of selling them sophisticated Russian weaponry he might be able to come up with. Lex even had a precedent - he had seen Danny Velt, one of our beards, make about $12 million selling Russian helicopters to South Africa.
Lex’s unofficial contact in the CIA came to meet him. The CIA wanted a radar tracking system that the Russians developed before the fall of the Soviet Union. It had never been deployed, and the CIA wanted it. Our timing was good. The fall of the Soviet Union had left large caches of sophisticated weapons in former Soviet republics. The CIA was worried the weapons would be sold to our enemies. Buying the most sophisticated radar tracking could provide defense against the threat of weapons in the hands of a rogue state. It seemed a small price to pay to assure long-term military stability.
The remainder of this book will be updated here as soon as possible. (05/12/2020)
Actual Indictment
March 2000 FBI Indictment:
'Goodfellas Meets Boiler Room'
New York Times, March 3, 2000 -
'19 Charged in Stock Scheme Tied to Mob'
"In predawn raids, nearly 100 federal agents arrested 11 of the 19 people charged in the stock fraud scheme, including the brother-in-law of Salvatore Gravano, the Mafia hitman turned informer better known as Sammy the Bull.
While federal law enforcement officials acknowledged yesterday that Wall Street and La Cosa Nostra had a tangled history of illicit dealings, they said the current scheme, run from the offices of two financial district brokerage firms, involved the most senior members of the Mafia to date.
Mr. Gravano's brother-in-law, Edward Garafola, 61, of Staten Island, was indicted along with five other people the authorities called organized crime figures, including Frank Coppa, 58, of Manalapan, N.J., who was described as a captain in the Bonanno crime family. At least two members of the Russian Mafia were also charged, the authorities said.
Lewis D. Schiliro, the assistant director of the Federal Bureau of Investigation in charge of the New York office, refused to explain what role the Russian mob had in the case, but he said, in general, that the Russians ''have the ability to bring in an international money-laundering angle, particularly with overseas accounts.'' Indeed, the indictment accuses some of the 19 defendants of funneling their ill-gotten gains through Caribbean accounts.
According to the indictment, the scheme, which lasted from 1993 to 1996, was led by John Doukas, 52, of Cross River, N.Y., and Walter Durchalter, 34, of Middle Village, N.Y., who together controlled the brokerage firms of White Rock Partners & Company and State Street Capital Markets Corporation in downtown Manhattan.
In a ploy described as a 'pump and dump', Mr. Doukas, Mr. Durchalter and their partners secretly bought huge blocks of stock in four companies, then artificially inflated the stocks' value by flooding the marketplace with false and misleading information, the authorities said. When a stock reached what the brokers assumed was its height, they sold it swiftly and suddenly, the authorities added, ignoring frantic phone calls from helpless investors who also wanted to sell.
Thousands of investors across the city were duped, said Loretta E. Lynch, the United States attorney in Brooklyn. In some cases, she said, the stocks these investors held plunged from being worth tens of thousands of dollars to being worthless within seconds.
Because the partners could hardly ask the authorities for help if there were problems, they turned to the gangsters for protection, said Jonathan S. Sack, an assistant United States attorney.
Mr. Schiliro said the brokers 'availed themselves of the muscle offered by La Cosa Nostra' as the gangsters settled disputes among feuding brokers and thwarted attempts by outsiders to extort money from the firms.
Of the eight defendants not arrested yesterday, four were expected to turn themselves in today, two were already in custody on unrelated charges and two were believed to be overseas."
Link
These defendants in this 2000 indictment are further detailed individually below.
To skip ahead in the story to where Sater is doing business in Russia with some of the same partners, here.
Key Players
This section below will be completed ASAP. Targeting August 2020.
1. Frank Coppa, Sr.
2. Ernest Montevecchi
3. Daniel Persico
4. Jack Basile
5. Rocco Basile
6. Larry Berman
7. John Cioffoletti
8. John Doukas
9. Walter Durchalter
10. Edward Garafola
11. Lev Daniel
12. Eugene Lombardo
13. Edmond Nagel
14. Alfred Palagonia
15. Aleks Paul
16. Joseph Polito, Sr.
17. Lawrence Ray
18. Abraham Salaman
19. Guiseppe Temperino
Sands Point
Felix Sater's home in Port Washington was purchased in 1995, shortly before he was released from prison.
This section will be updated/completed as soon as possible. Targeting Fall 2020 for completion.
FBI Cooperation
Organized Crime Wall Street
2000 Congress Subcommittee Hearing - Organized Crime on Wall Street
In September of 2000, there was a subcommittee hearing by the 106th Congress regarding organized crime on Wall Street. During this hearing, an individual by the name of Phillip Abramo was referred to as Abramo is described “by sources as controlling at least four brokerage firms and is identified in court documents as a capo in the Decavalcante organized crime family.” He is portrayed during this subcommittee hearing as controlling these firms and exerting influence on other firms “through front men.”
In another part of this transcript of the hearing, details regarding Abramo from a 1994 affidavit filed with the court in a bail hearing, it is stated, “the FBI identified him as a frequent visitor to reputed New York Mob boss John Gotti prior to his imprisonment in 1992," and alleged that Abramo held the rank of capo in the New Jersey organized crime family once headed by Sam “the Plumber 1 ’ DeCavalcante. But sources say that since then, Abramo has risen in the ranks to No. 2 in that crime family — underboss. Abramo is easily the highest-ranking reputed mobster to be engaged full-time in Wall Street activities. His lawyer, Harvey Weissbard, declined comment on Abramo’s alleged ties to organized crime. Asked about Abramo’s possible role on Wall Street, Weissbard said he had “no information of which I can respond one way or the other, and I doubt if I did know one way or the other that I would respond.”
Where this becomes clearly applicable to Felix is when the hearing goes into recent indictments for the stock fraud case Felix was involved with; this fraud having occurred according to the indictments between the years of 1993-1996. The following is an excerpt of where this is discussed:
“Another major strike against organized crime in the securities markets came on March 3, 2000 when the U.S. Attorney for the Eastern District of New York indicted 19 people, including six with alleged ties to organized crime. The indictment alleged that a broker-dealer, White Rock Partners (later renamed State Street Capital Markets), worked with brokers at several notorious boiler rooms, including J .W. Barclay & Co., A.R. Baron & Co., and D.H. Blair, engaged in microcap "pump and dump" manipulations. The indictment also alleged that the defendants most frequently relied on fraudulent Regulation S offerings to obtain their inventory of stock to manipulate. The six alleged organized crime members in the criminal enterprise are as follows:
Name / Position / Organized Crime Family:
Frank Coppa, Sr. / Captain / Bonanno
Edward Garafola/ Soldier / Gambino
Ernest Montevecchi / Soldier / Genovese
Joseph Polito, Sr. / Associate / Gambino
Shortly following the March 2000 indictment of 19 persons, there was another larger indictment in June of 2000. It is described in this way:
“The most recent law enforcement action against organized crime on Wall Street came on June 14, 2000. The SEC, U.S. Attorney for the Southern District of New York, FBI, and NASD Regulation jointly announced the results of a one-year undercover operation targeting microcap fraud, including organized crime operating in this market. The SEC sued 63 individuals and entities in five enforcement actions. The U .S. Attorney's Office indicted 120 defendants, including 11 members and associates of five different organized crime families, in connection with several securities fraud scams conducted through various criminal enterprises. The indictments allege fraud in connection with the publicly traded securities of 19 companies and the private placement of securities of an additional 16 companies. The 11 alleged members and associates of organized crime are as follows:
Name / Position / Organized Crime Family:
Michael T. Grecco / Associate / Colombo
James S. LaBate / Associate / Gambino
Vincent G. Langella / Associate / Colombo
Robert A. Lino / Capo / Bonanno
Anthony P. Stropoli / Soldier / Colombo
To give an idea of the problems due to the association of organized crime with Wall Street, here is an additional excerpt:
“What this all adds up to is a shocking tale of criminal infiltration abetted by widespread fear and silence — and official inaction. While firms and brokerage executives who strive to keep far afield of the Mob often complain of NASD inaction, rarely do such people feel strongly enough to share their views with regulators or law enforcement. Instead, they engage in self-defense. One major brokerage, which often executes trades for small-cap market makers, keeps mammoth intelligence files — to steer clear of Mob-run brokers. A major accounting firm keeps an organized-crime expert on the payroll. His duties include preventing his firm from doing business with brokerages linked to organized crime and the Russian Mob.”
Here are the excerpts from Felix Sater's 5K1 letter regarding his cooperation with the FBI on sophisticated Wall Street fraud crimes, as well as with Philip Abramo.
These were significant arrests as part of Operation Street Cleaner, mentioned periodically as the looming threat in the Scorpion and the Frog: High Times and High Crimes book co-authored by one of Sater's partners in the stock scam, Salvatore Lauria. As noted in that footnote above, it was Sater's cooperation which led to Coppa cooperating against other "several high-ranking members of the Bonanno Crime Family, including Joseph Massino, the head of the Bonanno family."
Sater's cooperation played a role in each of the defendants' pleading guilty and he was prepared to testify as a witness if they hadn't. The letter states they "believe that he would have been an effective an important witness if a trial of the case had been required" and that "his testimony would have been truthful, precise, and compelling."
One could even speculate Sater's cooperation began earlier than September 1998 when he returned from Russia and turned himself into the FBI due to the fact the Scorpion and the Frog book states he was the one who decided to keep and not shred the records on their offshore accounts used in the scam and didn't inform any of the partners he was doing so, as well as neglecting or forgetting to pay storage rental fees on the locker he had rented and placed them in before leaving for Russia.
The letter not released until August of 2019 explains how Felix Sater "provided the law enforcement authorities with a working knowledge of modern stock manipulation schemes and the mafia's involvement in the maintenance of those schemes. Federal investigators knew that many complex financial deals appeared suspicious, but could not uncover how they worked" and that it was Sater who "explained in detail how these sophisticated boiler room scams" were being ran and helped them see a "whole new brand of financial theft."
They attribute this newly gained knowledge on being able to (with Sater's help) build a case in the Southern District of New York against Philip Abramo, "The King of Wall Street."
According to Wikipedia, Abramo "On July 4, 2003, Abramo was convicted of five murders, including those of D'Amato and Weiss, as well as racketeering and loan sharking charges. In 2006, he was sentenced to life in prison. In September 2008, a federal appeals court reversed his racketeering conviction and ordered a new trial. According to the Federal Bureau of Prisons, Abramo was released on January 21, 2018."
New York Post - June 5, 2003
