Ten Members and Associates of the Colombo, Luchese, and Bonanno Organized Crime Families Charged with Racketeering and Extortion in Connection with Boiler Room Stock Fraud Schemes
Investors' Losses Estimated in Excess of $20 Million
An indictment returned by a federal grand jury in Brooklyn was unsealed this morning charging Colombo Family captain JOSEPH BAUDANZA, his brother, Colombo Family associate CARMINE BAUDANZA, his nephew, Luchese Family soldier JOHN BAUDANZA, Colombo Family soldier CRAIG MARINO, Colombo Family associates ARTHUR GUNNING, CRAIG LESZCZAK and ROBERT PODLOG, and Luchese family associate JERRY DEGEROLAMO with racketeering conspiracy, including predicate acts of securities fraud, extortion, witness tampering, kidnaping and money laundering. Bonanno Family soldier RONALD GIALLANZO and his associate VINCENT ROSSETTI are charged with extortion. The charges were announced by ROSLYNN R. MAUSKOPF, United States Attorney for the Eastern District of New York, and MARK J. MERSHON, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.1
The defendants arrested today are scheduled to be arraigned this afternoon before United States Magistrate Judge Marilyn D. Go, at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York. The case has been assigned to United States District Judge Raymond J. Dearie.
The case is the culmination of a three-year investigation of the Colombo Family’s corruption of the “penny” stock market. A penny stock is a stock of a corporation that trades under $5.00. As alleged in the indictment and in the government’s memorandum seeking the detention of JOSEPH BAUDANZA, JOHN BAUDANZA, CRAIG MARINO and ROBERT PODLOG, between 1994 and 2004, the defendants secretly controlled at least fifteen branch offices of brokerage firms located in Brooklyn, Manhattan, and Staten Island, through which unsuspecting investors were sold stocks whose prices had been falsely inflated through fraudulent means. Many investors were victims of classic “pump and dump” schemes involving the use of licensed and unlicensed brokers and cold callers who misrepresented their own credentials and the prospects of the stocks they were pushing. The brokers also routinely failed to disclose excessive cash commissions paid to them as bribes to tout stocks ripe for manipulation. The deceptive practices were used to drive the stock prices higher and maintain the prices as long as possible, until the defendants and their confederates could sell their personal holdings of the stocks at inflated values. The estimated loss to victims was in excess of $20 million.
To protect their financial interest in and to ensure the success of these criminal schemes, the defendants exploited their affiliation with organized crime to control and discipline stock promoters, brokerage firm owners, brokers, cold callers, and other employees at the brokerage firms through extortionate tactics, including threats of physical harm, beatings, and stabbings. In one instance, a stock promoter was kidnaped and chained to a pit bull until the promoter paid money owed to one of the brokerage firms. In another, a cold caller was hit over the head with a golf club, at the same time as a broker was beaten with a bat and stabbed after the broker said he wanted to leave the firm.
“We will employ all available resources to ensure that members of the investing public are not victimized by unscrupulous brokers backed by the mob,” stated United States Attorney MAUSKOPF. “Investors are entitled to a level playing field.” Ms. MAUSKOPF thanked the United States Securities and Exchange Commission, the Internal Revenue Service (Criminal Investigation), and the National Association of Securities Dealers, Department of Enforcement, for their extensive assistance in the investigation.
FBI Assistant Director-in-Charge MERSHON stated, “The association between organized crime figures and stock manipulation schemes is as logical as it is pernicious. The success of these illegal schemes depends on the enforcement of legally unenforceable agreements among dishonest brokers and promoters. If nothing else, mobsters are schooled in the methods of enforced discipline.”
If convicted of all charges, the defendants face the following maximum sentences: JOSEPH BAUDANZA, 70 years in prison, ARTHUR GUNNING, 35 years in prison, CARMINE BAUDANZA, 90 years in prison, RONALD GIALLANZO and VINCENT ROSSETTI, 40 years in prison, CRAIG MARINO and ROBERT PODLOG, 50 years in prison, JOHN BAUDANZA, 115 years in prison, CRAIG LESZCAK, 90 years in prison, and JERRY DEGEROLAMO, 95 years in prison. The indictment also seeks forfeiture of the proceeds of the racketeering activity, including five houses and all of one defendant’s interest in the businesses Zone Chefs, LLC, Zone Diet at Home, Inc., and Z.C.C.A. Corporation.
The government’s case is being prosecuted by Assistant U.S. Attorneys Patricia E. Notopoulos, Tanya Y. Hill, and Jennifer E. Schantz.
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