Wall Street Mafia

(9 am. – promoted by ek hornbeck)

  These are strange days. There was a time when there was a clear divide between fiction and reality, but those days are passing. For instance, this amusing article from Andy Borowitz.

  (The Borowitz Report) – Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs.

  There was an audible gasp in the courtroom when the leader of the pirates announced, “We are doing God’s work.  We work for Lloyd Blankfein.”

 The article was meant to be snarky and not taken seriously, but those are the kind of stories you have to keep the closest eye on. They tend to have a way of transforming from punchline to headline.

“I have always noticed that people will never laugh at anything that is not based on truth.”

 – Will Rogers

  About six months ago Interpol released a piece of information that has interesting implications.

 Pirates operating off the coast of Somalia are being controlled by crime syndicates, including foreigners lured by the multi-million-dollar ransoms, Interpol and other officials said on Wednesday.

  The pirates have also acquired sophisticated weapons and tracking devices allowing them to extend their reach, they added.

  “It is organised crime,” said Jean-Michel Louboutin, executive director of police services at Interpol, the France-based global police organisation.

  “Certainly, yes,” he told AFP when asked if people from outside Somalia were involved in the racket.

 So-called legitimate, wealthy businessmen hiring pirates to do their dirty work is a very old story that goes back to American colonial days.

  Robert Morris, the “Financier of the American Revolution”, owned one of the largest private navies in the world in the 1770’s. His “legal” pirates stole from British flagged merchant ships. He then took the cargo and sold it to American colonialists at exorbitant rates, making profits from both sides of the exchange.

 Ordinary Somali pirates only get a small portion — about 10,000 dollars – of the average two million dollars ransom for each hijacking, suggesting that organised crime groups get the bulk of the money, Palmer said.

 So what does this have to do with Wall Street banks? The banks are indispensable parts of any large-scale illegal monetary transaction.

  This is from SEC testimony before Congress in December 2000.

Mob involvement on Wall Street is not new. As organized crime advanced into the white-collar arena, the stock market became one of its targets.2  Indeed, there is evidence that organized crime had made inroads on Wall Street back in the 1970’s…

  Mob activity on Wall Street reportedly increased in the 1990’s. On February 10, 1997, The New York Times reported that “Mafia crime families are switching increasingly to white-collar crimes” with a focus on “small Wall Street brokerage houses.”

 The testimony included highlights such as the June 1999 case where the “Colombo Organized Crime Family of La Cosa Nostra controlled boiler rooms at brokerage firms” and the execution-style deaths of stock promoters Maier S. Lehmann and Albert Alain Chalem.

  In fact, it doesn’t take a lot of effort to find the fingerprints of mobsters on Wall Street. BusinessWeek found extensive mob involvement during an investigation in 1996.

 A three-month investigation by BUSINESS WEEK reveals that substantial elements of the small-cap market have been turned into a veritable Mob franchise, under the very noses of regulators and law enforcement…its chief means of livelihood is ripping off investors by the time-tested method of driving share prices upward–and dumping them on the public through aggressive cold-calling.

 The investigation revealed connections to the Russian mob, off-shore bank accounts in the Bahamas, and “increasing levels of violent ”persuasion” and punishment–threats and beatings” of brokers and traders.

 Patrick Byrne, the CEO of Overstock.com, tells about how he was personally threatened by the Russian Mafia when he wouldn’t give up his crusade against illegal, naked short selling of his company.

  The Mafia made so much money on the stock market in the late 90’s that they expanded their operations to other financial industries. Two years ago Attorney General Michael Mukasey told reporters that the mob was a national security threat.

 A department assessment of the organized crime threat found such groups “control significant positions in the global energy and strategic materials markets,” Mukasey said.

  “They are expanding their holdings in these sectors, which corrupts the normal functioning of these markets and may have a destabilizing effect on U.S. geopolitical interests.”

 In other words, the mob, while still trafficking weapons to terrorists, has gone into the business of commodities. You probably noticed the suspicious spike and fall of oil prices, but you may not have noticed the recently revealed manipulation of the precious metals market.

The Whistleblower

 Andrew Maguire is a metals trader in London. He had nothing to gain by contacting the Commodity Futures Trading Commission on February 3rd to alert them about a price manipulation event in the silver market by JP Morgan that would happen in two days. He described the scenario of how it was going to play out.

“It is common knowledge here in London among the metals traders that it is JPM’s intent to flush out and cover as many shorts as possible prior to any discussion in March about position limits.”

 – Andrew Maguire

  On February 5, as the metals price smackdown happened exactly as he foretold, he emailed the CFTC and explained to them what was happening in real time. His emails can be seen here.

 Six weeks later, when the CFTC began holding hearings to tighten regulations, Maguire became angry that he wasn’t invited to testify. So he contacted Bill Murphy from the Gold Anti-Trust Action Committee and gave him his information so he could go public with it.

 Not so coincidentally, the very next day after going public, Andrew Maguire and his wife were driving in London when a car sped out of a side street and struck their car. Both Maguire and his wife were injured, but not serious. The car then sped off, nearly running over pedestrians in an attempt to get away.

  Is it really any surprise that exactly one day after Maguire went public his life was suddenly in danger? Patrick Byrne might be able to shed some light on that subject.

 You might be wondering how the 2008 meltdown effected Wall Street’s connection to organized crime. Put simply, it strengthened it.

 Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations’ drugs and crime tsar has told the Observer.

  Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

 There’s been a lot of joking comments recently about the criminal activity on Wall Street. The term “banksters” has been thrown around a lot.

  But is it really a joke?

 William Black rails against Wall Street fraud, and with good reason.

But maybe the obvious fraud of Wall Street is just the tip of the iceberg. Maybe the corruption is far more deep and pervasive. Maybe the dividing line between Wall Street financial transactions and organized crime has been blurred to the point of being a national security risk, as Mukasey has said.

 Maybe the system is so corrupt that reforms just aren’t enough. Maybe we should be approaching Wall Street, not as a dysfunctional industry, but a criminal enterprise.