NASD SCORES IN 'CROOKLYN'

By Paul Tharp
New York Post
January 14, 2005

A crooked band of brokers with links to organized crime ran amok cheating the elderly out of millions in a Brooklyn bucket shop, the NASD said.

The fast-talking gang at Yankee Financial Group spent a year siphoning nearly $17 million from unsuspecting senior citizens, touting worthless shell companies that often had as little as $120 in their bank accounts, according to the complaint.

The NASD yesterday barred numerous members of the gang from the industry, and ordered principals of Yankee Group to return $3.8 million to at least 10 of their victims who lost everything on the scams.

The victims included a 55-year-old who ran up $14,000 on credit cards to give to a rogue broker; a 57-year-old laid-off computer consultant who gave his last $7,377 to the group; an 84-year-old who lost $1.2 million and an 86-year-old who lost $1.15 million.

The brokers even dropped the name of billionaire investor Warren Buffett in their pitches, suggesting he was buying into the stocks, the NASD said. The activity occurred in 2001 and 2002.

The stocks — selling for around $1.50 to $2 — included three virtually defunct companies carrying relatively large losses on their books, suggesting they may have been used as a front to conceal cash flows.

They were:

The Brooklyn bucket shop was set up after two traders in Long Island taped the Yankee name onto the cover of an old compliance manual of a legitimate shop where they had worked previously. That was then submitted to the NASD to start operations.

It worked for more than a year, and drew in a group of nearly 50 salespeople from other boiler rooms — many of whom had no licenses and weren't registered with the NASD as brokers, the agency said.

One of the leading salespeople, Joseph Ferragamo, joined from a New York firm, Valley Forge Securities, where he had been vice president, according to the complaint. Months earlier, Valley Forge had been indicted by the U.S. attorney alleging it was controlled by organized crime, the NASD said in its complaint yesterday.

Ferragamo, who has been involved in numerous earlier-trading complaints over unauthorized trades and plugging worthless shares, couldn't be reached.

In less than two years, the bucket shop sold more than eight million shares of the three shell companies, raising nearly $17 million the NASD said.

The NASD barred the president of Yankee, Richard Kresge, from associating with any NASD-registered firm as a principal or supervisor.

Yankee couldn't be reached for comment.

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