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HealthTech mob ties charged
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November 25, 1997: 4:40 p.m. ET
19 indicted for stock manipulation, racketeering, extortion and wire fraud
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NEW YORK (CNNfn) - Federal authorities Tuesday charged 19 individuals with extortion and racketeering in a sweeping investigation of mob-related influence on Wall Street.
In a 25-count indictment, the U.S. Attorney's Office for the Southern District of New York in Manhattan charged the individuals -- who include registered brokers, officials with a small Arizona-based health club operator and several reputed mobsters -- with extortion, racketeering, stock manipulation, bank fraud and wire fraud.
According to the indictment, the defendants allegedly conspired to boost the stock price of HealthTech International Inc., a small company based in Mesa, Ariz., in return for stock in the company, which was later sold for a profit.
"This was a classic pump and dump operation," FBI Assistant Director James Kallstrom told reporters at a news conference.
Authorities from the FBI, Securities and Exchange Commission and the New York Police Department said 18 people have been arrested so far in three states and the remaining individual is expected to surrender to authorities as early as Wednesday.
"This is a deliberate attempt by high level members of organized crime to make a lot of money," U.S. Attorney Mary Jo White said at the news conference.
Shares of HealthTech haven't traded since Nov. 14. The stock (GYMM) last sold at 1-3/16 on the Nasdaq.
Brokerage firm Meyers Pollack Robbins Inc. as well as HealthTech Chief Executive Gordon Hall were named in the indictment. The reputed mobsters included figures from the Genovese and Bonanno crime families.
The four reputed organized crime figures indicted include Rosario Gangi, a suspected captain or "capo" in the Genovese crime family, and Ernest "Butch" Montevecchi, a soldier in the Genovese family, the government said. Also indicted were Frank "Curly" Lino, an alleged capo in the Bonanno crime family, and John "Boobie" Cerasani, a reputed soldier in the Bonanno crime family, the government said.
Other defendants mentioned in the indictment included Eugene Lombardo and Claudio Iodice, identified as stock consultants, Irwin Schneider, a disbarred securities lawyer, and Jow Kirkham, formerly HealthTech's senior vice president and head of the company's medical operations division.
According to the indictment, the defendants worked with members of Meyers Pollock Robbins Inc. to boost the company's stock price and trading volumes through a variety of allegedly illegal practices, including so-called "boiler room" sales tactics.
On the day the scheme allegedly began, Jan. 2, 1997, the government said the price of HealthTech stock surged 53 percent and trading volume soared 250 percent.
The scheme continued for several months, allowing the defendants to reap profits of more than $1.36 million, the government said.
Executives of HealthTech International and Meyers Pollock couldn't be reached for comment.
The indictments stem from a yearlong investigation into allegations that organized crime has established a presence in the market for small-cap securities.
"These attempts are relatively isolated, and do not threaten the overall stability of our markets," said U.S. Attorney Mary Jo White, who is prosecuting the defendants.
HealthTech owed as much as $180,000 to reputed mobsters, prosecutors said. At one point, the mob threatened to knife and kill members of Hall's family, they added.
"The company had overstated its assets by as much as 800 percent," said Bill McLucas of the Securities and Exchange Commission's Enforcement division.
"It was vastly over-representing its value," McLucas said.
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