Laundry Services at the Bank of New York

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Editor’s Note: Hamlet would say something is rotten on Wall Street. We have all been hearing about the greed that has gotten us into this bank break down and the laissez-faire approach of our government which enabled it. The question is how far does the rot go?

 

 

Editor’s Note: Hamlet would say something is rotten on Wall Street.  We have all been hearing about the greed that has gotten us into this bank break down and the laissez-faire approach of our government
which enabled it. The question is how far does the rot go?

BSN has decided to tread on the edge by allowing our columnist to bring up that which is deeply disturbing about our financial sector. Read at your own peril.


Forget about Switzerland, Luxembourg and other countries where money is said to be laundered. 
The big apple is the money laundering capital of the world. 

Only, the American economy is big enough and bad enough (i.e. willing) to launder tens of billions of dollars every year into commercial investments
via its banks and brokerage houses. Until recently Americans have been in love
with the very people who have put the financial system
and therefore their country at risk.

Its like we’ve all forgotten the 90’s when the United States was shocked
by money laundering scandals involving major banks like the Bank of New York, now The Bank of New York Mellon Corporation.  I become involved in this mess as a result of a federal probe by the Justice Department and the FBI.

In the early 80’s I was a trader, a market maker representing Frost & Sullivan at the American Stock Exchange. For those who remember, my firm was in the center of a probe on insider trading that was infamously called the Motel 6 scandal.I was the only individual, who received inside information in Motel 6 and who did not trade on the basis of that information. 

Frost & Sullivan was only the tip of the iceberg. The FBI discovered that  the Amex was the stage for various illegal activities like the laundering of drug money via the Cayman Islands by the “white millionaires of Wall Street”,
and stock promoting of which I became privy, when Alfred “Al” Avasso  approached me, in my office with his get- rich-quick scheme .

Avasso, who always sported a well groomed pompadour hair-do, was a former member of the Amex. He was banned from trading back in the 70’s after being found guilty of falsifying stock options.

Avasso asked me to front for him. He would put up the money and I would make the trades that would artificially
drive up value of the PNF Industries stock, a maker of fire-retardant ceramic coating products.

I said, “You got to be kidding me,” and declined to take part his scheme.1Avasso managed to get around me and with the help of two members of the Amex board, Robert Van Caneghan and Louis “Chicky” Miceli, he put his plan in motion. Eventually the PNF stock collapsed and a lot of people lost their money.

And that’s when I went to the Feds.

I was surprised to learn that the Feds already had their sights on members of the Amex whom they suspected of illegal activities. a They wired me to go into  Papoo's, a restaurant behind the stock exchange were all sorts of characters would hang out and discuss the days trades. The Feds wanted me to catch  Amex board members talking about money laundering, or the PNF fraud.

Unfortunately somebody tapped me on my way in to the restaurant and dislodged the recording device
so I was never able catch anything on tape.Despite my mission not accomplished the Feds thought they had enough information to move forward.

 In 1993 Assistant United States Attorney Frances Fragos  went to a federal judge got  search warrants and convened a grand jury.

At the same time the Securities and Exchange Commission went after Avasso and his entourage.Avasso got off lightly with a slap on the wrist fine.But before Fragos could go any further on the drug money investigation, she was transferred from her position. (She later went on to become the Assistant to President Bush for Homeland Security and Counterterrorism.)

2It all culminated in a, 1999,  Business Week cover story called, Scandal On Wall Street, about criminal violations of federal securities laws that were exposed at the Amex.  More than one page was devoted to me
and I was proclaimed a whistle-blower.

After Fragos failed to nail shut the stock fraud case, it all fell to the U.S. attorney for the Southern District Mary Jo White.The 46-year-old  was the first woman to hold that post and she went on to carve a swath through the criminal landscape with indictments against white collar criminals and Mafioso’s like John Gotti.

Sadly, She did not live up to her fierce reputation in this case and allegedly, dropped the case as a favor to big wigs in the SEC and industry insiders who had made a lot of money on the scheme and  simply wanted the whole matter to go away.I walked away from the experience very disappointed in my government which had not gone after the goons on Wall Street as they should have.

The government’s hands-off approach to Wall Street is not new. Even before the mortgage meltdown government
has been letting Wall Street run amok .

After the Business Week article had been published, I went out of my way to urge the authorities to follow up
on the serious suspicions I had of money laundering at several prominent financial institutions.  The FBI told me that this was old news to them.

The Feds said the Department of Justice had failed to investigate a Russian money laundering operations.at the Bank of New York.(Information, which appears in this article concerning money laundering at Bank of New York is public information, and can be found in various court filings 08-CV-1678.)

After the fall of the Soviet Union, Russia went into a turbulent transition period between a communist plan economy and
a capitalist free market system. In this predatory climate previously state owned firms were privatized over night
and taken over by individuals with close ties to the government and loose interpretations of the rule of law.

Many nouveau riche Russians sought to evade tax laws or in extreme cases launder money made from drugs and other illegal activities.

Their favorite launderer was the Bank of New York.

3According to the Feds the Chairman of the Bank of New York, Tony Renyi knew about the illegal laundering of $7 -10 Billion from Russia in their accounts. 

bThis seemed at variance with what Tony Renyi, told members of the House of Representatives and the United States Senate during Congressional Hearings during 1999. 
Renyi stated that he only suspected that money was being laundered from Russia.

Yet I was told that the money laundering operation from Russia at Bank of New York was orchestrated by Peter Berlin and Lucy Edwards,who were top management darlings.

4Currently the Russian Customs Federation is suing Bank of New York for $22 billion, $7 billion plus triple damages, under RICO, a federal act, in a Moscow Court.  The Bank of New York is fighting this lawsuit
and has said that it cannot be sued under RICO in a foreign court.

But this should be the gravamen of the issue.  What liability does the American government have for failing to prevent
the laundering of money from Russia by the Bank of New York? 

Editors Note: The next article in the banking fraud series is about Citibank.
Stay tuned.



1 NYT Article: From Fanfare to SEC
 http://www.nytimes.com/2006/07/27/business/worldbusiness/27bank.html?_r=1&oref=slogin

a) Edward Manfredonia FBI Wire Order 
http://www.edward-manfredonia.com/uploads/doc.Untitled.pdf

2 Business Week Article:  Wall Street Scandals  
http://www.businessweek.com/1999/99_17/b3626001.htm

3 Russian Money Laundering Hearing before the  Banking Committee  Official Page:
http://financialservices.house.gov/banking/

a) Hearing Part 1 and 2  
http://financialservices.house.gov/banking/92199toc.htm

b) Testimony Thomas Renyi, Chairman and CEO, Bank of New York
http://financialservices.house.gov/banking/92299wit.htm

c) NYT Article: U.S. Officials Say Bank of New York Transfers Involved Money in Russian Tax Cases http://topics.nytimes.com/top/news/business/companies/bank_of_new_york_company/index.html?offset=80&&

4 Forbes Article: Russia sues Bank of New York for $22.5 bl
http://www.forbes.com/afxnewslimited/feeds/afx/2007/05/17/afx3731323.html

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