FAIRFIELD | June 15, 2000 -- A Fairfield broker was among 120 people rounded up by the FBI Wednesday in what federal authorities called the largest securities fraud crackdown in U.S. history.
Stockbrokers and members of all five New York organized crime families were among those snagged by the FBI. The schemes allegedly reaped more than $50 million in illegal profits.
The far-reaching fraud stretched over five years, and never before have so many people been charged at once in such a case, U.S. Attorney Mary Jo White said. She said 98 of them, including Chester Chicosky of Mill Plain Road, Fairfield, had been arrested by early Wednesday afternoon.
Barry W. Mawn, FBI assistant director in charge of the New York office, said the investigation had "uncovered once again La Cosa Nostra's efforts to infiltrate the securities markets."
Chicosky faces charges of conspiracy to commit securities fraud, which carries a five-year prison term, and securities fraud, which carries a 15-year sentence. He was released on $100,000 bail.
The indictment alleges that Chicosky worked from June 1994 to March 1996 as a registered broker with Gilford Securities, 850 Third Ave., New York City and from March to July 1996 with Brookehill Equities, 545 Madison Ave., New York City. He was licensed by the National Association of Securities Dealers.
DMN Capital Investments Inc. in Manhattan obtained large blocks of securities at little or no cost, the indictment said, and then allegedly paid bribes to Chicosky and other brokers to induce customers to buy and hold the stocks.
Chicosky did this with 65,000 shares of Spaceplex Amusement Centers International, Ltd., a Nevada corporation that operated amusement parks; 30,000 shares of Reclaim, a Delaware corporation that recycled roofing shingles, and 5,000 shares of Beachport Entertainment Corp., a Utah corporation that produced ice skating shows the indictment alleged.
Prosecutors said the FBI learned much about the schemes when agents secretly recorded about 1,000 hours of conversations at DMN, a company White said served as "investment banker to the crooked and the corrupt."
It attracted "mobbed up" broker-dealers and investment advisers, unscrupulous stock issuers, unethical lawyers and accountants and microcap manipulators, a "virtual Who's Who of securities violators," White said.
Chicosky was charged in only one of 16 indictments and seven criminal complaints unsealed Wednesday.
FBI agents from New York arrested Chicosky about 6 a.m. He was brought before U.S. Magistrate Judge William I. Garfinkel in Bridgeport, where he waived his right to an identity hearing and agreed to appear in federal court in Manhattan on June 22.
As part of the scheme, the Internet was sometimes used to promote stocks, and companies were falsely touted as dot.com companies to induce investors to capitalize on the Internet boom, prosecutors said.
Among those charged were 10 alleged members and associates of organized crime, a former New York police detective, a West Coast investment adviser, stock promoters, brokers, and officers, directors and other insiders of several companies.
Arrests occurred in New Jersey, New York, Connecticut, Pennsylvania, Maryland, Virginia, Georgia, Florida, Alabama, Texas, Illinois, Utah and California, Mawn said.
The participants allegedly engaged in racketeering, using bribery, extortion and even soliciting murder to further frauds that reaped millions of dollars in illegal profits.
As part of the scheme, members and associates of the Bonanno and Colombo organized crime families allegedly forged alliances with members and associates of the remaining three New York organized crime families, authorities said.
They then sought to defraud union pension plans, using traditional "boiler-room" operations and Internet techniques to carry out their crimes, prosecutors said in a statement.
When those techniques failed, they resorted to threats, extortion, physical intimidation and the solicitation of murder to further their goals, they said.
The criminal enterprise allegedly tried to manipulate eight publicly traded securities and to defraud investors in connection with three private placements of securities, including one by Ranch 1 Inc., a company that operates fast food restaurants in the New York City area and elsewhere.
The parties paid bribes and kickbacks to secure business and to induce sales of worthless securities, illegally manipulated the value of stocks, participated in sham offerings of securities "or otherwise lied, cheated or stole from innocent investors," officials said.
The case led the SEC Wednesday to suspend trading in what was called "two of the latest e-commerce wonders."
The companies are Wamex Holdings Inc., with a market cap of $184 million, which claims it was about to begin operating an alternative trading system so customers could trade directly with one another even though it "has never obtained, much less even filed, for an application for required regulatory approval."
The other company, E-Pawn.com, describes itself as a Web site designer and e-commerce software developer and carries a market cap of $198 million even though it is secretly controlled by a convicted felon, prosecutors said.
They then sought to secretly control or infiltrate various New York City-area brokerage firms, White said.
A telephone call to DMN was not answered Wednesday. Members of the racketeering enterprise punished those who reneged on their agreements, subjecting them to beatings, intimidation and threats, authorities said.
The Associated Press contributed to this report.
