BW: Mobbed Up on Wall Street

BusinessWeek: An inside look at the Mafia "brokerages" that thrived in the '90s -- and the career of one con artist

It was one of the most disturbing aspects of the bull market: the Mob setting up shop on Wall Street. Although organized crime had participated in a smattering of stock scams years before, never had "wise guys" actually established and run brokerage firms. In the 1990s, firmly encamped in lower Manhattan, the six New York area crime families took a hefty chunk of the $10 billion-a-year trade in grossly overpriced microcap stocks. By the end of the millennium, Wall Street had become a leading Mafia cash cow.

None of this could have happened without the foot soldiers of the Mob's Wall Street operations -- hundreds of hustling kids drawn by easy money in fabulous amounts. These were ambitious youths from the streets with no real knowledge of stocks and no skills other than the ability to lie. And none cut a wider swath than a skinny kid from Staten Island named Louis Pasciuto.

When Pasciuto's career began in the fall of 1992, at a brokerage firm called Hanover Sterling & Co., he was all of 18 years old. His previous vocation had been pumping gas -- and stealing from the cash drawer. By the time of his arrest by the FBI in October, 1999, Pasciuto had worked at 17 brokerage houses. The last of them was nothing more than a phone and a bank account in which he put money stolen from investors. By then he'd raked in uncounted millions of dollars, much of which he shared with partners in the Mob.

To his FBI case officer, Kevin Barrows, Pasciuto was a "one-man stock-fraud crime wave" who was "the Forrest Gump of securities fraud" -- since he showed up at just about every sleazy brokerage in Manhattan. Some of these were "chop houses" that sold nearly worthless stocks at absurd prices. Others were "bucket shops" that pretended to sell stocks.

Pasciuto's knowledge and candor made him an invaluable cooperating witness. He provided the FBI with priceless information that, Barrows notes, "led to the indictment of countless gangsters and corrupt brokers."

How did Pasciuto manage to stay in business for so long? Pure salesmanship. Although he had no background in finance and knew so little about investing that he socked away his own money in a mayonnaise jar, he became a star broker by sheer virtuosity on the phone. But he was not even licensed -- until he paid someone to take the NASD test.

And law enforcement should not rest easy. Organized crime will always be attracted to such easy money, and Mob-watchers say Mafia stock scams, both on and off the Internet, continue to flourish. As recently as last summer, a New York chop house made an effort to recruit Pasciuto.

The inside story of the Mob's foray into Wall Street is chronicled in Born to Steal: When the Mafia Hit Wall Street by Gary Weiss, a BusinessWeek senior writer who broke the story of the Mob's penetration of the Street in a 1996 cover story, "The Mob on Wall Street." The book has already had repercussions. On May 16, Federal prosecutors will seek Pasciuto's incarceration, claiming the book will jeopardize his safety. That is hotly denied by Pasciuto, the author, and the publisher, who assert that prosecutors are punishing Pasciuto for telling his story.

The following book excerpt describes Pasciuto's apprenticeship in crime at Hanover Sterling's offices in Lower Manhattan.

A THIEF FINDS HIS CALLING

Louis was put to work in the "boardroom." It was a weird use of the word, which most people associate with long tables surrounded by retired rear admirals and other members of corporate boards of directors. In the chop houses, boardrooms were big rooms crammed with desks for the brokers and cold-callers. At Hanover, the desks were arranged in clusters, and people would work in "crews." And the guys in the crews were all very much like Louis.

These were kids from the outer boroughs and the close-in suburbs. Kids who had gone to community college or no college at all. White "ethnics," the Manhattan snobs would call them. Guys who spoke with New York accents. In Manhattan, people didn't talk like that anymore if they could help it. If you had any kind of standing in Manhattan, you worked hard to eradicate that way of talking. Not Roy Ageloff, the quick-fisted boss of the brokers at Hanover. Not the kids in the boardroom.

Years ago, these kids couldn't have made it into the front office. If they had worked hard and gotten MBAs, maybe they could have gotten assistant-trader gigs at second-tier firms. But these kids didn't have MBAs. Some of them could barely read. They couldn't have gotten any firm to hire them as brokers, not when it was the Eighties and the market was booming and the Street was filled with ambitious preppies trying to make it in the business. Kids without fancy college degrees could have only made it to the back offices, slogging along as clerks. Or maybe working in the dingy rooms where brokerage trades are executed. But the penny-stock era of the 1980s started to put street guys into the front offices.

Now the chop-house era was beginning, and the street kids were everywhere. Hanover Sterling was at the forefront of this socioeconomic-demographic revolution on Wall Street. In the boroughs and the 'burbs, news was spreading, fed by word of mouth and ads in the city's tabloids: The Street was looking for ambitious kids from the street.

Roy took a liking to Louis, and introduced him to the best broker at the firm, Chris Wolf. One day he had Louis hang out in the office with Chris and his partner Rocco Basile. Louis listened to them pitch for an hour or two.

Louis was in the presence of genius.

"Man, he was good. Definitely one of the best salesmen I've seen. Chris is about five feet four or five. Long, pushed back hair. Good-looking kid. Real name's not Wolf. It's Italian. He's an Italian kid. Changed his name to Wolf for his broker license. That's the name he chose to do business. Great name, Chris Wolf. Jewish much better than Italian last name," said Louis.

"So I listened to him, and he had this thing that he did when he opened accounts. Somebody would say, 'I'm not interested, blah blah blah.' Chris would say, 'O.K., take care.' Then Chris would call them back 30 seconds later and he'd say: 'You know, Bob, I just gave you that investment opportunity, and I'd be a jerk to let you off the phone. It's an outstanding situation. All I'm looking for is for you to buy one share or a thousand shares -- it don't matter. It's not the dollar amount. Give me a chance to show you percentage gains. Because you know and I know that if I show you 40% on paper, I'm going to be the broker you're going to be doing business with year-round.' Blah blah blah. So you beat him up till he buys the stock."

Louis paid attention. The next morning he called one of his leads and pitched him, using another broker's name. He used the whole spiel, and after the guy hung up he did a callback and talked about being a jerk to let him off the phone. Blah blah blah.

It worked. The guy bought 1,000 shares.

"I get off the phone and I'm screaming 'A thousand shares! I opened a thousand shares!"'

At this point Louis hadn't passed the Series 7, which is the test administered by the NASD that gives brokers the solemn right to sell stocks to the public. He wasn't supposed to be using someone else's name. He also guaranteed profits, which was another no-no. But this was Hanover, after all -- part of the Chop House Wall Street that dwelled in a parallel universe with the Real Wall Street.

After that, Louis became a pitching fiend. Pitching to everybody. Pitching to himself in the mirror. Pitching to his girlfriend, to his father.

Louis was a natural at getting people to do things. He had been manipulating people since he was a kid. He had the knack, the instinct.

"How