THE MOB ON WALL STREET--PART 1

A three-month investigation reveals that organized crime has made shocking inroads into the small-cap stock market

In the world of multimedia components, Phoenix-based SC&T International Inc. has carved out a small but significant niche. SC&T's products have won raves in the trade press, but working capital has not always been easy to come by. So in December, 1995, the company brought in Sovereign Equity Management Corp., a Boca Raton (Fla.) brokerage, to manage an initial public offering. ''We thought they were a solid second- or third-tier investment bank,'' says SC&T Chief Executive James L. Copeland.

But there was much about Sovereign that was known to only a very few. There were, for example, the early investors, introduced by Sovereign, who had provided inventory financing for SC&T. Most shared the same post office box in the Bahamas. ''I had absolutely no idea of who those people were,'' says Copeland. He asked Sovereign. ''I was told, 'Who gives a s---. It's clean money.''' The early investors cashed out, at the offering price of $5, some 1.575 million shares that they acquired at about $1.33 a share--a gain of some $5.8 million.

By mid-June, SC&T was trading at $8 or better. But for SC&T shareholders who did not sell by then, the stock was an unmitigated disaster. Sovereign, which had handled over 60% of SC&T's trades early in the year, sharply reduced its support of the stock. Without the backing of Sovereign and its 75-odd brokers, SC&T's shares plummeted--to $2 in July, $1 in September, and lately, pennies. The company's capital-raising ability is in tatters. Laments Copeland: ''We're in the crapper.''

A routine case of a hot stock that went frigid. Or was it? Copeland didn't know it, but there was a man who kept a very close eye on SC&T and is alleged by Wall Street sources to have profited handsomely in the IPO--allegedly by being one of the lucky few who sold shares through a Bahamian shell company. His name is Philip Abramo, and he has been identified in court documents as a ranking member, or capo, in the New Jersey-based DeCavalcante organized crime family.

James Copeland didn't know it. Nobody at SC&T could have dreamed it. But the almost unimaginable had come true: Copeland had put his company in the hands of the Mob.

Today, the stock market is confronting a vexing problem that, so far, the industry and regulators have seemed reluctant to face--or even acknowledge. Call it what you will: organized crime, the Mafia, wiseguys. They are the stuff of tabloids and gangster movies. To most investors, they would seem to have as much to do with Wall Street as the other side of the moon.

But in the canyons of lower Manhattan, one can find members of organized crime, their friends and associates. How large a presence? No one--least of all regulators and law enforcement--seems to know. The Street's ranking reputed underworld chieftain, Abramo, is described by sources familiar with his activities as controlling at least four brokerages through front men and exerting influence upon still more firms. Until recently, Abramo had an office in the heart of the financial district, around the corner from the regional office of an organization that might just as well be on Venus as far as the Mob is concerned--the National Association of Securities

Dealers, the self-regulatory organization that oversees the small-stock business.

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. And that is a daunting prospect for every investor who buys small-cap stocks and every small company whose stock trades on the NASDAQ market and over the counter. For the Mob makes money in various ways, ranging from exploiting IPOs to extortion to getting a ''piece of the action'' from traders and brokerage firms. But 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.

In its inquiry, BUSINESS WEEK reviewed a mountain of documentation and interviewed traders, brokerage executives, investors, regulators, law-enforcement officials, and prosecutors. It also interviewed present and former associates of the Wall Street Mob contingent. Virtually all spoke on condition of anonymity, with several Street sources fearing severe physical harm--even death--if their identities became known. One, a former broker at a Mob-run brokerage, says he discussed entering the federal Witness Protection Program after hearing that his life might be in danger. A short-seller in the Southwest, alarmed by threats, carries a gun.

Among BUSINESS WEEK's findings:
-- The Mob has established a network of stock promoters, securities dealers, and the all-important ''boiler rooms''--a crucial part of Mob manipulation schemes--that sell stocks nationwide through hard-sell cold-calling. The brokerages are located mainly in the New York area and in Florida, with the heart of their operations in the vicinity of lower Broad Street in downtown Manhattan.

-- Four organized crime families as well as elements of the Russian Mob directly own or control, through front men, perhaps two dozen brokerage firms that make markets in hundreds of stocks. Other securities dealers and traders are believed to pay extortion money or ''tribute'' to the Mob as just another cost of doing business on the Street.

-- Traders and brokers have been subjected in recent months to increasing levels of violent ''persuasion'' and punishment--threats and beatings. Among the firms that have been subject to Mob intimidation, sources say, is the premier market maker in NASDAQ stocks--Herzog, Heine, Geduld Inc.

-- Using offshore accounts in the Bahamas and elsewhere, the Mob has engineered lucrative schemes involving low-priced stock under Regulation S of the securities laws. Organized crime members profit from the runup in such stocks and also from short-selling the stocks on the way down. They also take advantage of the very wide spreads between the bid and ask prices of the stock issues controlled by their confederates.

-- The Mob's activities seem confined almost exclusively to stocks traded in the over-the-counter ''bulletin board'' and NASDAQ small-cap markets. By contrast, New York Stock Exchange and American Stock Exchange issues and firms apparently have been free of Mob exploitation.

-- Wall Street has become so lucrative for the Mob that it is allegedly a major source of income for high-level members of organized crime--few of whom have ever been publicly identified as having ties to the Street. Abramo, who may well be the most active reputed mobster on the Street, has remained completely out of the public eye--even staying active on the Street after his recent conviction for tax evasion.

-- Mob-related activities on the Street are the subject of inquiries by the FBI and the office of Manhattan District Attorney Robert M. Morgenthau, which is described by one source as having received numerous complaints concerning mobsters on the Street. (Officials at both agencies and the New York Police Dept. did not respond to repeated requests for comment.)

-- Overall, the response of regulators and law enforcement to Mob penetration of Wall Street has been mixed at best. Market sources say complaints of Mob coercion have often been ignored by law enforcement. Although an NASD spokesman says the agency would vigorously pursue reports of Mob infiltration, two top NASD officials told BUSINESS WEEK that they have no knowledge of Mob penetration of member firms. Asked to discuss such allegations, another high NASD official declined, saying: ''I'd rather you not tell me about it.''

-- The Hanover, Sterling & Co. penny-stock firm, which left 12,000 investors in the lurch when it went out of business in early 1995, is alleged by people close to the firm to have been under the control of members of the Genovese organized crime family. Sources say other Mob factions engaged in aggressive short-selling of stocks brought public by Hanover.

-- Federal investigators are said to be probing extortion attempts by Mob-linked short-sellers who had been associated with the now-defunct Stratton Oakmont penny-stock firm.

Mob manipulation has affected the markets in a wide range of stocks. Among those identified by BUSINESS WEEK are Affinity Entertainment, Celebrity Entertainment, Beachport Entertainment, Crystal Broadcasting, First Colonial Ventures, Global Spill Management, Hollywood Productions, Innovative Medical Services, International Nursing Services, Novatek International, Osicom Technologies, ReClaim, SC&T, Solv-Ex, and TJT. Officials of the companies deny any knowledge of Mob involvement in the trading of their stocks, and there is no evidence that company managements have been in league with stock manipulators. These stocks were allegedly run up by Mob-linked brokers, who sometimes used force or threats to curtail short-selling in the stocks. When support by allegedly Mob-linked brokerages ended, the stocks often suffered precipitous declines--sometimes abetted, traders say, by Mob-linked short-sellers. The stocks have generally fared poorly (table, page 99).

Not all of the stocks were recent IPOs, and they were often taken public by perfectly legitimate underwriters. International Nursing, for example, went public at $23 in 1994 and was trading at $8 in early 1996 before falling back to pennies. Short-sellers who attempted to sell the shares earlier this year were warned off--in one instance by a Mob member--market sources assert. International Nursing Chairman John Yeros denies knowledge of manipulation of the stock.

What this all adds up to is a shocking tale of criminal infiltration abetted by widespread fear and silence--and official inaction. While firms and brokerage executives who strive to keep far afield of the Mob often complain of NASD inaction, rarely do such people feel strongly enough to share their views with regulators or law enforcement. Instead, they engage in self-defense. One major brokerage, which often executes trades for small-cap market makers, keeps mammoth intelligence files--to steer clear of Mob-run brokers. A major accounting firm keeps an organized-crime expert on the payroll. His duties include preventing his firm from doing business with brokerages linked to organized crime and the Russian Mob.

In the pages that follow are the results of BUSINESS WEEK's investigation.

THE BOX
At about 3 o'clock in the afternoon of Sept. 25, 1996, three men appeared on the 28th floor of 120 Broadway, Manhattan. They walked into the offices of Sharpe Capital Inc., a dealer in over-the-counter stocks. They were burly. ''Like lumberjacks,'' said an eyewitness soon after. A gun was in the belt of one of the men.

The confidential police report of the incident (Complaint No. 10530, First Precinct) reads as follows:

''At that point they asked the victim what he was trading in. Then they slapped him in the head and stated again, 'What the f-- are you trading in.' Then he slapped the victim in the head again.''

A witness recalls one of the men saying: ''Don't f-- with our stock.'' The stock: Crystal Broadcasting Inc. After the men left, Sharpe stopped trading in Crystal Broadcasting.

To the New York Police Dept., the incident at Sharpe was about as serious as a scuffle over a parking space. A police source says that the assault, categorized as a low-grade misdemeanor at best, is considered closed and is not being investigated because the victim was not seriously hurt, no gun was displayed--even though one was observed--and the perpetrators were unknown. (However, one witness ruefully notes, police did nothing to ascertain their identity--such as examine a security-camera surveillance tape.) Sharpe's CEO, Lawrence Hoes, declined to discuss the matter.

But BUSINESS WEEK learned that the assault at Sharpe was not an isolated incident. Rather, it was part of a systematic pattern of intimidation. By eliminating competing market makers and allowing only cooperating brokers to bid on stocks, the result is a kind of rigged auction--with the prices where desired, and the spreads between bid and ask prices kept as wide as possible. In Street parlance, this process of rigging the market in a stock is known as ''boxing'' a stock. It is part of the lexicon of the Mob's dominion on Wall Street (page 99).

The box is the heart of most stock-manipulation schemes. In the case of Crystal, the trader at Sharpe was suspected of ''cracking the spread.'' According to market sources who were familiar with the trading in Crystal that day, Sharpe was blamed, in effect, for doing what a market maker is supposed to do--get the best possible price for its customers and keeping the spreads as narrow as possible. During the day, Crystal traded as low as 4, well below the 5 1/8 closing price of the day before, and the spreads narrowed as well, to a relatively reasonable 4 3/8 bid and 4 7/8 ask. Sharpe was blamed for that benign--to most people--market action.

In the weeks following the Sharpe incident, Crystal shares were trading at the kind of spreads that can only happen when the market is tightly controlled. If you buy it from a dealer, you pay the ask price, $3.50. But when you sell it, you get the bid--56.2 cents. (Crystal's president, Joseph Newman, said he had no knowledge of coercion of market makers in his stock.)

Sometimes the maneuvering involved in creating and exploiting the box can be as subtle as a bison in a china shop. One West Coast investor, who requested anonymity, says that brokers at a small New York firm, Monitor Investment Group, convinced him that two small-cap stocks--International Nursing Services and Beachport Entertainment--were about to be pushed upward. Says the investor: ''They said they had a handle on all this stock. They said they'd run it up and get me out of it in a week.''

So sometime around last New Year's Day, he bought warrants and a big block of the stock--100,000 shares of International Nursing and 85,000 of Beachport. When he tried to sell, he says, his brokers flatly refused. The shares, which had started heading southward almost from the moment he bought them, plummeted. They're now worth one-fifth of what he paid. Monitor Chairman William F. Palla denies the firm was involved in stock manipulation but concedes a broker may have promised a runup but not really meant it.

Sometimes, of course, thinly traded stocks can be run down by aggressive short sellers, and the Mob is alleged by Street sources to have profited from that as well. One target of investigators, sources say, is a coterie of brokers formerly associated with the defunct penny-stock brokerage of Stratton Oakmont. Sources familiar with the investigation say that authorities are exploring charges that some of these brokers, after Stratton's demise, may have extorted money from their former colleagues in the business--allegedly threatening to short-sell stocks underwritten by those firms. According to sources, the Stratton brokers allegedly shared their profits with a member of a New York crime family.

Among the trading being investigated, sources say, are stocks underwritten by a penny-stock firm called State Street Capital Markets. Stocks brought public by the New York-based firm--Fun Tyme Concepts, U.S. Bridge of N.Y., and Cable & Co. Worldwide--were pummeled in the market last August, and trading in the stocks is allegedly being probed. At the time, State Street maintained that its shares were victimized by concerted short-selling. State Street officials did not return phone calls, and Stratton officials could not be reached for comment.

''YOU'VE MADE A FRIEND''
First Colonial Ventures Ltd. is a minor venture-capital firm whose stock trades on the OTC bulletin board--so small that it is not required to file more than token disclosures with the Securities & Exchange Commission. But for market makers in small-cap stocks, First Colonial looms huge. It is an object lesson: When the Mob speaks, market makers obey.

The incidents took place early in October, one week after the assault at Sharpe. First came a beating. A trader at Naib Trading Corp. in Fort Lauderdale was summoned to the office of a man by the name of Roy Ageloff. The trader has told associates that Ageloff had beaten him once before with a nail-pierced baseball bat. This time, he said, Ageloff left the room. Then a 400-pound hoodlum knocked him down and kicked him while he was on the floor. The message: Stay away from First Colonial.

The trader at Naib was not the only one to suffer ''persuasion'' over First Colonial. Sources say that four other firms were approached with warnings to cease trading in the stock. To be sure, it was not a total success. There was one rebuff: A market maker in the little town of Hurst, Tex., Anthony Elgindy of Key West Securities Inc., says he ignored warnings that traders who did not comply would soon be ''facing the ceiling''--and has received numerous threatening phone calls since then. But at two other market makers, the intimidation worked. They ceased making a market in First Colonial.

The market makers dropping the stock were William V. Frankel & Co. in Jersey City, N.J., and the biggest name in NASDAQ stocks: Herzog, Heine, Geduld. Sources say traders at both firms quit trading the stock after receiving menacing visits at their offices. ''We decided we shouldn't get involved in a stock like that,'' says Herzog's head trader, Irwin Geduld. Was anyone at his firm threatened? ''We weren't,'' said Geduld. ''Someone else was.'' (A Frankel trader, who declined to give his name, says: ''We have no comment whatsoever about First Colonial Ventures.'') Even a brokerage that was not a market maker, D.L. Cromwell Investments Inc. in Boca Raton, received a visit from a thug, a source says. The visitor left after demanding, and being shown, proof that the firm was not a short-seller in the stock. Cromwell officials declined comment.

Sources say that traders who caved in to coercion later received expensive bottles of liquor with a note that read: ''You've made a friend.'' But the market makers who dropped First Colonial were making no new pals among investors. Since the incident, the ask price paid by the public for buying First Colonial stock has climbed--from a low of $1.13 on Oct. 2 to as high as $4.13 in recent trading. But the bid price that the public gets when selling the stock back to the Street has been far less buoyant. The bid promptly rose from a low of 87 cents on Oct. 2 to $1.50 and has stayed at about that level, even as the ask price has skyrocketed to almost three times that figure. (On Oct. 4, according to a letter sent to market makers obtained by BUSINESS WEEK, the NASD launched an inquiry into the dropping of First Colonial stock by market makers. The NASD declined comment on the investigation.)

Who was behind the wave of intimidation over First Colonial? NASDAQ trading figures point toward a New York-based firm called PCM Securities Ltd. PCM was the largest market maker in First Colonial in September, with 48% of the trades. By October, however, this rose to 75%. PCM completely dominated the market in First Colonial.

Although he is not listed in NASD records as a control person or even as an employee of PCM--or of any other brokerage--Street sources say that the power behind PCM is the 37-year-old Ageloff. He did not respond to numerous messages left at PCM's office in Boca Raton. An employee there said Ageloff nowadays spends most of his time there, punctuated by frequent visits to New York. Asked about Ageloff, Steven Edelson, PCM's principal, denied that Ageloff has any role in the firm and says he has met him only once. Edelson had no comment on its trading in First Colonial, and First Colonial President Murray Goldenberg said he was ''shocked'' to hear reports of intimidation of market makers.

THE MOB ON WALL STREET--PART 2

A TALE OF TWO MARKETS
Even though NASD records show Ageloff has not been officially associated with any brokerage firm over the past two years, he is a widely known figure in small-cap stock circles. Why would market makers drop a stock just because Ageloff tells them--even when he is not accompanied by ''persuasion''? Street sources say the fear he inspires is justified: The force that drives Ageloff, they maintain, is a 59-year-old man who, on official record at least, has never set foot on Wall Street. He is Alphonse Malangone, otherwise known as ''Allie Shades,'' and his few appearances in the public record pertain almost exclusively to another market--the Fulton Fish Market.

''Allie Shades'' Malangone is the Zelig of the Mob's Wall Street coterie. For years, he has been observed by investigators in lower Manhattan, ensconced in the twin worlds of the Fulton Fish Market and the stock market. To law enforcement he is an alleged loan shark and gambler, a longtime power behind Mob control of the Fulton market, and he is described in court proceedings by federal and state law enforcement officials as a capo in the Genovese crime family.

But to the very few Wall Streeters who know him, he is a sophisticated market player who is an expert at ''working the spreads''--getting in at the bid price and exiting at the ask price, with the help of cooperative traders. ''He's very smart, very articulate,'' says one investigator. ''When you hear him on the wire, he would couch what he would say in gambling phrases'' to mislead investigators.

Investigators are not fooled, but despite close surveillance and wiretaps dating back to the 1980s and perhaps before, they have been unable to make a case against Malangone and other reputed Fulton market mobsters for their suspected activities on Wall Street. One longtime Malangone-watcher recalls that the Fulton market was believed by law-enforcement authorities in the early '80s to be a clearinghouse for stolen bonds. But nothing was ever proven.

Investigators thought they were on to something, finally, in 1985. They had in their sights two big fish, so to speak--Malangone and Vincent Romano, also identified in court papers as an alleged Genovese family member who was suspected of involvement in the Fulton market. Malangone and Romano were probed by federal and local authorities for their alleged manipulation of a pharmaceutical company stock, Nu-Med Inc., a company that later declared bankruptcy. Investigators believed that the two men had a position in Nu-Med shares. The investigation was never made public, for authorities couldn't build a case against Malangone and Romano. Efforts to reach the two men were unsuccessful.

Sources on Wall Street say that Malangone was a behind- the-scenes player in the biggest penny-stock fiasco of recent years: Hanover Sterling. According to sources, Malangone controlled Hanover through his right-hand man, Alan Longo, who has been identified by federal authorities in court filings as a member of the Genovese family. Longo, who is described by acquaintances as a heavy gambler, is said by sources to have worked directly with Ageloff in Hanover and other market ventures.

Ageloff--in concert with his alleged Mob contacts--is believed by market sources to have been the hidden control person at Hanover. It went out of business in early 1995 and resulted in the demise of the firm that it cleared through, Adler, Coleman & Co. An attorney for the trustee in the Adler Coleman bankruptcy, Mitchell A. Lowenthal, says that his firm, Cleary, Gottlieb, Steen & Hamilton, has discovered evidence that 65% of Hanover's profits were shared by Ageloff and another Hanover official. Efforts to reach Hanover execs were unsuccessful.

Street sources say that the Mob was involved in both sides of the Hanover-Adler imbroglio. The Malangone-Longo-Ageloff faction, they say, profited from the runup in Hanover stocks, while other mobsters allegedly sold short the Hanover stocks and pushed their prices downward--to the chagrin of the Malangone faction. This internecine dispute, sources close to Hanover say, was eventually resolved without bloodshed, but only after some tense meetings between Mob factions. Lowenthal says that his firm's investigation has shown that ''Ageloff and some of the shorts were all connected [to the Mob] in one way or the other,'' but nothing was proven.

According to people close to the Hanover Sterling machinations, the Mob was represented on the short side through Falcon Trading Group and Sovereign Equity Management Corp. And those brokerages, sources say, are controlled by the alleged SC&T profiteer--a silver-haired, 51-year-old resident of northern New Jersey named Philip C. Abramo.

Abramo's name has never surfaced in any of the thousands of pages of deposition testimony taken by the adversaries in the Hanover-Adler Coleman legal warfare. Nor have his recent legal troubles--a federal fraud indictment-- resulted in exposure of his Street ties or alleged Mob membership. Abramo's stunning success at avoiding publicity has helped make him the most active reputed Mob honcho on Wall Street. ''He is educated. He sounds sincere,'' says one source. ''He's gotten all these wiseguys to work together.''

THE ''CONSULTANT''
In court records and corporate filings, Philip Abramo gives his business address as 176 Saddle River Road, South Hackensack, N.J. The address applies to not one but several buildings, forming a kind of cul de sac on a dreary street in an industrial town in northern New Jersey. It is a quiet area. A cemetery is next door. Faded lettering shows that one of the buildings was once used many years ago to process meat. Today they house an auto-body shop, a construction company, and other little offices with ambiguous names.

Listed in no official records is another address for Phil Abramo--one that is far more apropos for a man who is a hidden power in the brokerage industry. Until a couple of months ago, sources say, Abramo maintained an office on the 14th floor of 90 Broad St. in lower Manhattan, directly adjoining the New York office of Sovereign Equity Management. A door linked the two offices, and it was always open. ''I knew him as a stock promoter who always had stock deals. We hired brokers who were friends of his,'' says one Sovereign employee who requested anonymity. Sovereign CEO Glen T. Vittor denies that Abramo had any role in the firm.

But sources describe his role as central--as the hidden control person behind Sovereign, a prominent name in the micro-cap stock business, its sister firm Falcon Trading, and two other firms that are major penny-stock brokers and market makers, Toluca Pacific Securities Corp. and Greenway Capital Corp. He is also described by Street sources as controlling other dealers in small-cap stocks through brokers and traders owing allegiance to him.

On paper, Abramo is respectability personified. Over the past decade he has been listed as president or top shareholder of four publicly held investment companies. He is married, with a grown daughter. He has been a ''restaurant consultant,'' auto dealer, and construction company operator. He has had four years of college and may even have training as an accountant.

But inquiries about Abramo bring far from routine reactions. At Greenway Capital, President John Margiotta is asked if he knows Abramo. Margiotta replies: ''Who?'' and hangs up the phone. A person answering the phone at Greenway, moments later, says that Margiotta is ''very busy'' and ''not in the office.'' Toluca Pacific President Paul Fiorini, when asked about reports of Abramo's control of his firm, calls them a ''total farce.'' He says he owns 100% of the firm and goes on to say: ''Who is this person? I don't want my name associated with this. I don't know this person. I don't know Phil Abramo.''

The reason for the reticence is understandable. According to federal court records in recent tax-evasion proceedings against Abramo in Newark, the Saddle River (N.J.) resident lists his occupation as ''consultant.'' But elsewhere in the court file, the FBI gives a different version of his livelihood. In 1994, in an affidavit filed with the court in a bail hearing, the FBI identified him as a frequent visitor to reputed New York Mob boss John Gotti prior to his imprisonment in 1992, and alleged that Abramo held the rank of capo in the New Jersey organized crime family once headed by Sam ''the Plumber'' DeCavalcante. But sources say that since then, Abramo has risen in the ranks to No.2 in that crime family--underboss.

Abramo is easily the highest-ranking reputed mobster to be engaged full-time in Wall Street activities. His lawyer, Harvey Weissbard, declined comment on Abramo's alleged ties to organized crime. Asked about Abramo's possible role on Wall Street, Weissbard said he had ''no information of which I can respond one way or the other, and I doubt if I did know one way or the other that I would respond.''

Little is known about Abramo's early life, such as which college he attended. Except for a conviction for possession of stolen property in 1971 and another in 1973 for conspiracy to distribute heroin--which yielded him a seven-year prison sentence--he has stayed out of the limelight. Even when he was indicted in 1994 in New Jersey for allegedly swindling 300 people nationwide out of $1 million--they were sold phony ''lines of credit''--he received no publicity and continued to work on the Street.

Indeed, by the time he was indicted in the credit-line scheme, Abramo already had a lengthy, ostensibly legitimate track record. In the late 1980s Abramo founded publicly-held investment companies with names such as Cambridge Investment Service Corp. and American Acquisition Corp. (SEC filings by these companies show they did little but file papers with the SEC.) According to papers filed by Abramo with the SEC for the investment companies, Abramo was a ''restaurant consultant to Northern Roses Inc. (Miami, Fla.),'' during 1982, and ''was also a restaurant consultant to Bagel Nosh Inc. (1983 and 1984--New York, N.Y.).'' Abramo's Bagel Nosh connection is significant, because the company was brought public by Thomas J. Quinn.

Quinn was one of the most prominent figures in the penny-stock world, but his association with Abramo has never been made public, although regulators have long suspected it. When Quinn was jailed in France in 1988 for securities fraud, investigators say, Abramo's name was prominently displayed in a notebook that was seized from him. Calls in 1995 from Quinn's telephone to Abramo's unlisted home phone number also appeared in phone records that were recently subpoenaed by investigators seeking Quinn's assets. (He was successfully sued by the SEC for securities fraud in 1989 and owes millions of dollars in civil penalties.) Indeed, Abramo was subpoenaed to testify before the SEC in 1989 during a probe of Quinn, but he invoked his Fifth Amendment privilege against self-incrimination. Efforts to reach Quinn for comment were unsuccessful.

The Quinn-Abramo connection could become significant in the months ahead because of an ongoing federal grand jury probe in California into possible irregularities in the trading in Solv-Ex Corp., an Albuquerque-based company that claims to have a process for retrieving oil from tar sands. (Solv-Ex officials denied knowledge of any trading irregularities and claimed that a private investigator's report, which they refused to release, indicated there was no manipulation.) According to sources close to the grand jury probe, Abramo and Quinn are among those who have been a subject of the investigation.

Today, Abramo faces a one-year prison term for tax evasion. It was a plea bargain--the guilty plea to tax evasion in return for dropping of the loan-scheme charges. He is scheduled to report to prison on Jan. 7. While he may well handle his Street interests while incarcerated, in some quarters there is concern that his departure will mean an increase in violence.

The level of violence is becoming worrisome. Early in November, a broker at a New York-area brokerage was severely beaten, his arm broken, in the lobby of the firm. As so often happens in such situations, he did not notify the police. His offense: He moved from a Mob-controlled firm, taking his customers with him, and dared to sell their stocks. Sell pressure on stocks is just what the Mob despises (unless, of course, they are short). It can sour a deal--and the often immense profits that can come with it.

THE DEAL
Mama Tish's International Foods is a Chicago-based company that makes Italian ices. But when it went public last month, it was red-hot. The IPO went for $5, but on the first day of trading, the shares moved as high as $9.75--a sure sign of ''flipping,'' in which favored investors cash out of the stock immediately. Alas, the Mama Tish IPO was canceled--wiping out all the trades--when the underwriter, a Long Island firm called Landmark International Equities, got into a heated dispute with the firm that clears its trades. The company and underwriter were disappointed--and so were some people who hate to be disapppointed.

Even before the deal began, traders began receiving phone calls warning them not to short the IPO, which might have driven down prices. According to Wall Street sources, among the people who would have profited heavily from the Mama Tish IPO is John Gotti Jr., reputed acting boss of the Gambino family and son of the imprisoned Gambino crime family chieftain. According to Wall Street sources, ''Junior'' Gotti is the hidden owner or control person of one of the brokerages--other than Landmark--that was active in the Mama Tish deal. Had the deal gone through, any Gotti people involved in the deal would have profited handsomely from the 80% difference between the offering price and the trading price of the shares. Gotti was unreachable for comment. A company official said he did not know of any Mob involvement in the IPO.

If ''Junior'' Gotti represents the younger generation of reputed mobsters on the Street, the older generation would be epitomized by John ''Sonny'' Franzese. Franzese has been described by law-enforcement authorities for decades as an influential, feared mobster who allegedly was the former underboss of the Colombo crime family. Sources say Franzese joined the Mob's rush to the stock market after his release on parole from a 50-year term for bank robbery in 1994. According to sources, the 77-year-old reputed Mob elder described himself to associates earlier this year as controlling, through a confederate, Monitor Investment Group, whose brokers allegedly ripped off the West Coast investor by promising a guaranteed runup. Monitor chairman William F. Palla denies that Franzese or organized crime has ever played any role in the firm.

Monitor, which ceased active operations last June, is described by former employees as a center for widespread stock manipulation--specifically involving boxing of International Nursing Services, Beachport Entertainment, and Innovative Medical Services. Officials of the three companies say they were unaware of any irregularities in the trading of their stocks. International Nursing Chairman John Yeros, however, concedes he felt something was amiss at Monitor when he attended a presentation the brokerage sponsored for International Nursing at a downtown hotel--and found that Monitor had hired a hooker to ''service'' the brokers in attendance. Palla says he heard of the ''hooker incident'' but denies Monitor retained that person.

If Franzese in fact became involved in the penny-stock business, it would be a potent sign of the lure of the penny-stock business to the Mob. But like Abramo, Franzese may have to cool his interest in the market for a while. He was recently found to have violated the terms of his parole and was ordered back to prison.

THE FUTURE
There are plenty of young mobsters ready to take the place of any old-timers who might fall victim to any future law-enforcement crackdown. One Brooklyn-based prosecutor, a specialist in the Mob, observes that ''there are a lot of wannabes getting jobs on the Street, working in these places, cold-calling.'' That might explain why there seems to be no shortage of people willing to carry guns into brokerage houses and beat up traders in front of witnesses, or telephone threats to traders.

One reputed up-and-comer in the Street's Mob contingent is Dominick ''Black Dom'' Dinassio, who is said by Street and law-enforcement sources to hold sway over Euro-Atlantic Securities, a Manhattan brokerage that is active in penny stocks. According to a source in the Manhattan District Attorney's office, Dinassio is allegedly an associate in the Colombo crime family.

Law-enforcement sources say that Dinassio has lately been observed in the company of Longo, Malangone's longtime partner. Sources say a short-seller who was active in shorting Hanover stocks, John Fiero, told police recently that Dinassio threatened him for his trades in one stock brought public by Euro-Atlantic, Hollywood Productions Inc. Fiero refused comment and company officials did not return phone calls. Contacted at Euro-Atlantic's office in lower Manhattan, Dinassio declined to discuss his role at the firm. Asked about the allegations that he was connected to organized crime, he replied: ''What? I think you're crazy, buddy. I'll talk to you later,'' and hung up. Euro-Atlantic officials did not return phone calls.

Although whistle-blowers in Mob-run firms are rare, the increasing violence is beginning to enter the public record. At Monitor, the firm Franzese allegedly claimed to control, an incident last January led to a rarity in this world--a lawsuit. In a suit filed in U.S. District Court in Manhattan, former broker Robert Grant contends that he was ''maliciously and violently struck, battered, beaten, pummelled, pushed, punched, and attacked'' by Monitor employees at the instigation of Palla and another manager. At one point, the suit says, Grant was beaten with a chair. The lawsuit does not say so, but witnesses say that another broker was also viciously assaulted. Neither Grant nor the other broker would comment, and Palla says he was in Philadelphia at the time of the incident, which he describes as a ''fight.'' One witness says Monitor management suspected that the two brokers may have been short-selling Monitor's favorite stocks.

Some of the most violent, crudest elements to come to the Street are part of its fastest-growing contingent--the Russian Mob, based in the Brighton Beach section of Brooklyn. ''Over the past couple of years, they've put people in the [brokerages], kids with clean records, and they're washing money legitimately,'' says one law-enforcement official who is intimately familiar with Russian organized crime. The offspring of two major Russian mob figures, he notes, have been active on Wall Street.

The Mob's fascination with Wall Street is understandable, for they have had little to fear from law enforcement or regulators. If the authorities, finally, act against Mob members who are active on the Street, it will be the first such prosecution since 1973, when three major Mob figures were imprisoned for securities fraud. At the time, the Mobsters were vanquished because one of their confederates became a government witness. ''It's practically impossible to prosecute these people unless you have a turncoat, somebody who can walk you through all those transactions,'' notes Ira Lee Sorkin, a former SEC regional director who was involved in the 1970s prosecutions. So long as the Street continues to keep silent on the Mob in its midst, organized crime will continue to be the silent partner of the financial markets.

How the Mob Makes Money on Wall Street

TRADING SCAMS

THE BOX: Mob-affiliated traders control the market for a stock and its price by trading it among themselves--enforcing their control through bribery, violence, and intimidation. They then unload the stock on the public at an inflated price and, sometimes, sell it short to profit when the shares go bust.

REGULATION S: Through offshore accounts, Mob members illegally buy cheap stock issued under Regulation S of the securities laws--supposedly reserved only for foreign investors. The cheap stock is sold on the open market at vast, riskless markups.

FLIPPING: Mobsters, through front men, quickly unload, at inflated prices, stocks that are the subject of hot IPOs issued by firms they control.

BROKERAGE SCAMS

HIDDEN OWNERSHIP: Through front men who have no criminal records, the Mob controls, or has hidden ownership stakes in, at least two dozen NASDAQ brokerage firms.

TRIBUTE: Mob members get kickbacks from brokerages for protecting them from shakedown attempts by other mobsters.

EXTORTION: Mobsters, working with short-selling confederates, demand payments in return for not shorting the stocks issued by penny-stock and microcap brokerages.

In the Shadows of the Small-Cap Market

PHIL ABRAMO: Abramo is described by sources as controlling at least four brokerage firms and is identified in court documents as a capo in the DeCavalcante organized crime family. He recently pleaded guilty to one count of tax evasion, for which he faces one year in prison. He is scheduled to report on Jan 7.

THOMAS QUINN: The multinational stock honcho allegedly has ties to Phil Abramo. Quinn was sued by the SEC for securities fraud in 1989 and owes massive civil penalties.

DOMINICK "BLACK DOM" DINASSIO: He controls broker Euro-Atlantic, say Street sources. A short-seller told police Dinassio threatened him for trading a Euro-Atlantic stock.

ALPHONSE ''ALLIE SHADES'' MALANGONE: To law enforcement, Malangone is an alleged loan shark, gambler, and longtime power behind Mob control of New York's Fulton Fish Market. To Wall Streeters, he is a sophisticated trader who is an expert at working the spreads--getting in at the bid price and exiting at the ask price.

ALAN LONGO: Malangone's right-hand man is described by sources as a heavy gambler who, along with Malangone, maintained control of the now-defunct penny-stock firm of Hanover Sterling through their links to Roy Ageloff.

JOHN ''SONNY'' FRANZESE: Sources say Franzese joined the Mob's rush to the stock market after his 1994 parole from a 50-year term for bank robbery. The 77-year-old kingpin was recently found to have violated the terms of his parole and was ordered back to prison.

ROY AGELOFF: Sources say he's the power behind PCM Securities. He allegedly ''persuaded'' a trader to drop a stock by inviting him to his office, where the trader was beaten.

JOHN GOTTI JR.: The reputed New York Mob boss would have profited nicely from an IPO of an Italian ice maker. The canceled offering's shares traded high the first day.

Mobspeak: A Glossary

CHOP STOCK: A thinly traded stock with a very wide bid-ask spread

VIG: The ultrawide bid-ask spread commonly found in Mob-dominated stocks

HOUSE STOCKS: Stocks sold aggressively to the public by the firms that control them

BOXING (AS IN ''BOXING A STOCK''): Controlling the market for a stock by trades among cooperating brokerages

PARKING: Buying a stock for a customer by ''mistake,'' as part of a scheme to hike the price and control the market in a stock

Mob-Exploited Stocks: Most Have Suffered

These stocks have been identified by BUSINESS WEEK. The companies say they know 

of no Mob stock-rigging.


                                    52-WEEK HIGH     PRICE 12/3/96
AFFINITY ENTERTAINMENT                   10              2 /32
Produces feature and TV films


BEACHPORT ENTERTAINMENT                   6              1 1/2
Entertainment production company


CELEBRITY ENTERTAINMENT                   3 11/32        3/16
Operates theme park in Florida


CRYSTAL BROADCASTING                      6  1/2         9/16
Runs and acquires radio stations


FIRST COLONIAL VENTURES                   8  3/4         3 7/8
Miscellaneous holdings


GLOBAL SPILL MANAGEMENT                   11 23/32       3/8
Environmental contractor


HOLLYWOOD PRODUCTIONS                     11 1/2         8
Motion picture producer


INNOVATIVE MEDICAL SERVICES               7 3/4          4
Makes water-purification system


INTERNATIONAL NURSING SERVICES            8 1/4          1 5/16
Health-care services


MAMA TISH*                                N/A            N/A
Makes Italian ices


NOVATEK INTERNATIONAL                     13 1/8         1/2
Makes diagnostic devices


OSICOM TECHNOLOGIES                       20 1/2         8 1/2
Fiber-optic products


RECLAIM                                   42 1/2         1/8
Builds solid-waste treatment plants


SC&T                                      9              5/32
Makes multimedia peripherals


SOLV-EX                                   38             13 5/8
Extracts oil from oil sands


TJT                                       9 5/8          5 1/4
Tire repair and reconditioning


*Initial public offer was withdrawn, November, 1996.
DATA: BLOOMBERG FINANCIAL MARKETS, BUSINESS WEEK

DID THE NASD LOOK THE OTHER WAY?

He was the head of a penny-stock brokerage that has had its share of regulatory problems. This, he has told friends, is what happened to him early in 1996:

Two men appeared at his midtown Manhattan office. They went for a walk. One man stuck a revolver in his ribs. ''From now on,'' he was told, ''you're retailing our stocks.''

According to sources, this man's brokerage did not retail the two mobsters' stocks. Nor did he contact regulators or the National Association of Securities Dealers. Instead, he got in touch with the only power that seemed to make sense: a protector in the Mob. Somehow, the problem was ''straightened out.'' Asked about the incident by BUSINESS WEEK, he responds: ''I don't want to get involved.''

If this penny-stock exec showed a less than civic-minded attitude toward law enforcement, it's understandable--particularly if the allegations of a 57-year-old former NASD official, Massood Gilani, prove valid. Gilani worked in the Special Investigations Unit of the NASD's New York office, checking complaints of improprieties and reporting them to his superiors for further action. He paints a picture of widespread indifference toward customer complaints that might have been a tip-off of Mob infiltration of Hanover Sterling & Co.

From 1992, when Gilani started working at the NASD in New York, until late 1995, when he left, there was disturbing talk in the hallways of the agency's New York office. ''The rumor was that some of these firms were run by the Mafia...the word was that some of them, including Hanover Sterling, were used to launder drug money,'' he says.

Gilani says he received an unusually large volume of complaints about Hanover from customers, most involving unauthorized trades--something Gilani suspected might have indicated stock ''parking.'' ''They were definitely pushing the stocks up, and it definitely looked like parking,'' says Gilani. From October, 1993, to June, 1994, he says in the suit, there were at least 31 customer complaints against Hanover, almost all alleging unauthorized trading. Among the complaints, he says, were several against Roy Ageloff, who Gilani says was widely known at the NASD to be the power behind the firm. Sources have told BUSINESS WEEK that Ageloff has ties to the Genovese crime family.

Gilani says he ''suggested that a wider investigation be conducted by enforcement and market surveillance.'' The response? ''I was told to mind my own business.'' At one point, he was told by a supervisor ''very bluntly that [the brokerages] pay your paycheck. You don't bite the hand that feeds you.''

NASD officials note that they took action against Hanover Sterling--but not until after Hanover went out of business. Gilani says that he urged the NASD to act long before the company folded--in time, perhaps, for regulators to act before its failure brought down the company's clearing firm, Adler, Coleman.

Gilani is hardly an impartial source: He was fired by NASD in 1995, and he's suing for racial discrimination. (NASD officials decline comment on the suit.) Still, his comments regarding the NASD's handling of Hanover Sterling are damning.

To be sure, Gilani hardly had much clout at the NASD, since he was in the doghouse much of the time. One lawyer pursuing his suit, Aegis J. Frumento of Singer Zamansky LLP in New York, notes that the Iranian-born Gilani ''agitated a great deal on discrimination and employment policies.'' Gilani feels he was ignored because of the ''corporate culture at the NASD.'' And if his tale of indifference proves correct, it would seem that the NASD is a far cry from being the Eliot Ness of Wall Street.

From Business Week March 24, 1997:

THE MOB ON WALL STREET: WHY YOU CAN'T SEE IT
An inside look at how organized crime hides its involvement in stock deals

Early in the morning of Jan. 7, 1997, a television camera crew was staked out near 215 Oxford Ave. in Saddle Brook, N.J., a quiet suburb about a half-hour's drive from New York City. But the man who lives at that address, Philip C. Abramo, did not emerge. A day earlier, he had left to stay overnight near his new home--the Fort Dix federal correctional facility in central New Jersey, where he was about to begin serving a one-year term for tax evasion. The well-timed departure was quintessential Abramo--whose almost perfect record at avoiding publicity has cemented his role as a leading reputed Mob figure on Wall Street.

For years, Abramo has managed to avoid official scrutiny while allegedly controlling at least four brokerage firms and exerting a wide-ranging influence over the huge market for ''chop stocks''--Street lingo for easily manipulated micro-cap stocks (BW--Dec. 16). Nothing has put Abramo on the regulatory radar screen--not his indictment in a consumer fraud scheme, not his guilty plea to tax evasion. Not even his rise to the rank of capo in the DeCavalcante crime family, according to a 1994 FBI court affidavit.

How do Abramo and other reputed Mob financiers and stock promoters keep their machinations from regulatory and public scrutiny? The answer to this question can be summed up in two words: offshore companies.

Usually, the offshore financial mechanisms used by the Mob are enmeshed in secrecy. But lately some answers have turned up--all surrounding the December, 1995, initial public offering of a small Phoenix-based company that makes multimedia components, SC&T International Inc. At the center of this tale are a half-dozen shadowy Bahamian entities and Sovereign Equity Management Corp., which brought SC&T public. Street sources say Sovereign is controlled by Abramo through a man named Philip Gurian, whose National Association of Securities Dealers registration was revoked in 1991.

Gurian was the key player in organizing the offshore financial conduits that handled the SC&T deal. Also playing a pivotal role is a prominent Bahamian, the son of the island nation's former Prime Minister, Lynden Pindling. Also allegedly involved in the SC&T deal is a man described by Street sources and investigators as a longtime associate of both Abramo and Gurian--Thomas F. Quinn, a disbarred lawyer and convicted securities swindler with a two-decades-long history of running investment scams worldwide.

With its unlikely cast of characters, the tale of SC&T and the Mob is a prime example of how the Mob exploits companies and walks away unscathed, and, almost inevitably, unexposed. In the process, investors in small-cap stocks are routinely ripped off. By the time the public buys the shares at the IPO, the Mob has already cashed in cheap stock that it obtained well in advance. For SC&T's shareholders, the horror story did not begin until last year, when the company earned the distinction of being one of the worst performing stock issues in the NASDAQ small-cap market. But for the few who profited from the deal, the SC&T story begins late in 1994.

Back then, all looked promising. The company was about to get some preliminary financing. SC&T's chief financial officer dashed off a routine letter to the underwriter--Sovereign--on Dec. 19, 1994. The letter was addressed to ''Mr. Phil Gurian, Sovereign Equity Management.'' But there was no Phil Gurian at Sovereign. Not officially.

In fact, Gurian's role at Sovereign and the SC&T deal was crucial. Sources who are well acquainted with Gurian say that for years he has been the New York-based Abramo's key confederate at Sovereign's Boca Raton (Fla.) headquarters and serves a similar function at its sister company, Falcon Trading Group Inc. In the words of one former SEC organized crime investigator, the two men are closely linked--the ''two Phils,'' as he calls Gurian and Abramo. Both men also are alleged by investigators and sources to work closely with Quinn, whom they described as a master at organizing stock deals and high-pressure ''boiler room'' operations that sell stock to the public. One investigator, who has examined phone records of both Quinn and Gurian subpoenaed in an SEC lawsuit against Quinn, notes that there were phone calls between Gurian and Quinn--and between Abramo and Quinn--in 1995, while the SC&T financing was under way. There were also calls from Quinn to Falcon.

SMALL TALK? Gurian denies having any role at Sovereign or Falcon, but says that he is often at Sovereign because of his close friendship with its former president, Glen T. Vittor. (The December, 1994, letter was sent to him at Sovereign, Gurian says, because of his frequent visits to the firm.) Sovereign Compliance Director Thomas W. Hands denies that Abramo, Quinn, or Gurian have any role at the firms. Gurian readily admits that he had frequent phone contact with Quinn in 1995, but says that he discussed a variety of innocuous things. ''We talked about hockey,'' says Gurian. He says that he knows Abramo, but only as a ''stock promoter.'' Gurian denies any business dealings with Quinn or Abramo.

Although only in his mid-thirties, Gurian has long been enmeshed in the world of ''chop houses''--dealers in penny stocks such as Blinder, Robinson & Co., where he worked in the early 1980s.

In 1991, Gurian's registration was revoked by the National Association of Securities Dealers for nonpayment of fines imposed in disciplinary proceedings. But apparently, it didn't spark a career change for Gurian. In early 1994, the NASD brought charges accusing Gurian of working as a trader at Falcon without being registered and said he and Falcon had failed to honor trades from other brokerages. The NASD permanently barred him from the securities business. Gurian appealed, but the action was upheld in March, 1995.

But even though he was twice ordered to stay clear of the brokerage business, Gurian had a major role in the SC&T financing. That is clear from internal records produced under subpoena by SC&T in court proceedings brought against Sovereign, Falcon, and other firms by Edwin B. Mishkin, court-appointed trustee for the bankruptcy of Adler, Coleman Clearing Corp. Adler collapsed after the demise of the penny-stock firm Hanover, Sterling & Co., and Mishkin has filed suits accusing short-sellers, including Sovereign, Falcon, and Gurian, of causing Hanover's demise. The two firms and Gurian are fighting the suits.

The internal SC&T records subpoenaed by Mishkin in the suits include letters written by SC&T's then chief executive, James L. Copland, and addressed to ''Phil and Glen''--Sovereign former President Vittor and the barred broker, Gurian. Copland, who remains chairman but has since stepped down as SC&T's CEO, did not return phone calls. SC&T's new CEO, Thomas Bednarik, declined comment. SC&T's attorney, Sara R. Ziskin, said that company officials would not be interviewed for this article. In a previous interview, Copland acknowledged Gurian's key role in the financing but denied any knowledge of an organized crime role.

ANGRY LETTER. Gurian acknowledges that he worked on the financing--but insists that he did all that work out of friendship for Vittor. ''I didn't get paid a penny for that deal,'' he says. But Hands insists that Gurian is mistaken, and that he had no role in the IPO, paid or unpaid.

The Gurian-Vittor-SC&T correspondence was sometimes acrimonious. At one point, Copland expressed irritation at being put off when he asked where the money for the company was coming from. ''Yes, I do care fellows, who is funding it all, and right now I have no idea!'' said an exasperated Copland in a letter to ''Glen and Phil'' on May 15, 1995.

By the time Copland wrote that letter, SC&T already had gone through its first wave of interim financing. In April and May, Gurian and Vittor raised $2.5 million for SC&T by selling notes, warrants, and stock, mainly to six Bahamian investors: Maraval & Associates, Bauman Ltd., Caspian Consulting, Robert Adams, Roddy DiPrimo Ltd., and Ubiquity Holdings. In the IPO, the Bahamians cashed out for $5 apiece the 1.6 million shares they acquired at $1.33 a share--a gain of $5.8 million.

Copland would have gotten little information on the people funding his company--the Bahamians--from his own prospectus. The ''beneficial owners'' of the companies, listed in the prospectus, appeared to have no apparent links to either SC&T or Sovereign, which brought the company public. Who put the money into those Bahamian entities? Gurian won't say. But there is one solid clue to the people who were getting in on the ground floor of the SC&T deal.

Not long after the Bahamians were snapping up cheap shares, some two dozen individuals participated in the company's smallest round of financing. Some $875,000 in notes and SC&T stock were sold in a Sovereign-managed deal in August and September, 1995. The names were listed in the footnote to an SC&T filing with the SEC in November, 1995. Three of the 24 names have a familiar ring to them--Abramo and Quinn. Among the buyers of the private-issue shares and notes, duly redeemed in December, 1995, were Romilda Abramo--the wife of Phil Abramo--Frank Quinn and Laura Quinn. According to an investigator who has long tracked Thomas Quinn, Frank Quinn is the father, and Laura Quinn the aunt, of Thomas Quinn.

Quinn is the subject of a $25 million civil judgment arising from SEC proceedings involving stock deals in the 1980s, and investigators for the SEC are exploring the possibility that Frank and Laura Quinn have been used as thinly concealed fronts for Thomas Quinn. Quinn's attorney declined comment. Likewise, Romilda Abramo might easily have been a proxy for her husband. Indeed, their house in Saddle Brook is in her name as well. Efforts to reach Frank and Laura Quinn and Romilda Abramo were unsuccessful.

The presence of the Quinn and Abramo kinfolk is among the most compelling evidence of links between the two men--and their links to the SC&T deal. Another link between Quinn and the Bahamian companies appears in the phone records subpoenaed by the SEC in its legal tussles with Quinn. A source says they show calls from Quinn to a Bahamian company called Pindling & Co. during 1995.

Pindling is a crucial name in this saga. L. Obafemi Pindling is a registered agent for Ubiquity and the other Bahamian firms involved in the SC&T deal. (''Umbiquity'' is the name that appears in SEC filings but is apparently a misspelling.) Pindling is the son of Lynden Pindling, who was for many years Prime Minister of the Bahamas. How did such a prominent Bahamian get involved in setting up the Bahamian firms? Obafemi Pindling did not respond to phone calls and faxes to his office in Nassau.

PRIME MOVER. Pindling handled the paperwork involved in organizing the Bahamian companies. But by all accounts, he had no role in running them. Who did? Quinn may have had a role, as the phone records imply. But the man who had the leading role in operating those companies was none other than the ubiquitous Philip Gurian. Abramo's alleged associate was not only the prime mover behind the SC&T financing but also was instrumental in the operation of the offshore entities, which were set up in early 1994 and did more than just buy SC&T stock. Mishkin recently sued Ubiquity, Maraval, Caspian, and Bauman, claiming they received proceeds from improper short-selling of Hanover stocks. Gurian dismisses the suit as ''bull.'' A similar suit against DiPrimo recently resulted in a $150 million default judgment, which DiPrimo is appealing.

Gurian's involvement in the Bahamian companies would ordinarily never have come to light. Not a word was said about him in the SC&T prospectus or in the papers filed with the SEC by the offshore entities in connection with the offering. But there was an unforeseen development. Several months after the SC&T offering, some $1.7 million allegedly disappeared from Ubiquity's accounts held at a Canadian brokerage. In a suit filed against the brokerage and others by Ubiquity, the firm notes that the person who ''provided all trading instructions'' for the firm was none other than Phil Gurian. Gurian describes himself as merely an ''adviser'' to the Bahamian accounts. But he acknowledges that he directed the trading for Ubiquity and other Bahamians involved in the SC&T deal.

The case of the missing $1.7 million is a saga within a saga. Ubiquity claims in the suit that the money was stolen by a Canadian broker and a convicted penny-stock manipulator, Eric Wynn--whose ''coffee'' meetings with President Clinton have lately gained notoriety. Efforts to obtain an interview with Wynn, who recently began serving a prison sentence for securities fraud, were unsuccessful. In a statement to BUSINESS WEEK, he denies involvement in any theft and claims the theft never took place. Wynn says that Gurian falsely claimed that the money was stolen. He maintains that Gurian hatched a scheme to defraud the Canadian broker and its insurance company by falsely claiming the loss and then unsuccessfully sought to involve Wynn in the scheme. Gurian vigorously denies Wynn's allegations.

The Royal Canadian Mounted Police investigated the reported disappearance of the money--and came up with an intriguing tidbit about Ubiquity's ownership. According to a summary of the RCMP investigation, a copy of which was obtained by BUSINESS WEEK, an ominous incident took place after the money was found missing. A Canadian broker, accused in the suit of joining with Wynn in stealing the money, was visited in a Manhattan hotel room in mid-1996 by Gurian and what the report describes as ''three males.'' An RCMP investigator, who requested anonymity, says the three were described to the RCMP as ''hoodlums.''

Gurian says he brought along three ''friends'' to intimidate the broker, but denies they were ''hoodlums.'' He also denies reports, from sources familiar with the incident, that one of the three was an angry Abramo, who allegedly claimed the stolen money was his. Abramo's lawyer, Harvey Weissbard, declined comment.

BIG LOSERS. Whoever owned the money, it would seem Ubiquity and the other Bahamian entities were linked. A Dec. 20, 1995, letter from Sovereign's Hands instructs SC&T to make payments for all the Bahamian entities to a bank account in New York City--for the benefit of a single account at Pindling & Co. If Ubiquity was the victim of a heist, it was not the only party to the SC&T saga to have lost big. SC&T shareholders saw their shares, which went public at $5, climb to $8 in June before plummeting to pennies by yearend. Sovereign ceased supporting the stock.

For his part, Abramo, though incarcerated, has ensured that he remains current on activities in his old stomping grounds--Wall Street. And it is no surprise that the man who sources say is filling in for Abramo on the Street has also made a fetish of secrecy. He is an Abramo confidant who goes by the name of ''Lou''--a man who is so averse to publicity that only his closest confederates know his last name. Lou has been seen in New York City, Long Island, and Florida, watching out for the interests of his imprisoned associate. But if he decides someday to expand his vistas to the Bahamas, he will find the welcome warm and the wall of silence as comfortingly high as ever.

TABLE: Dramatis Personae

PHILIP ABRAMO: Alleged Mob capo now in jail for tax evasion. May have owned a Bahamian company involved in the IPO of SC&T.

JAMES COPLAND: Former CEO of SC&T. Expressed concern about the sources of funding.

PHILIP GURIAN: Barred broker who set up the SC&T IPO. Alleged associate of Abramo and Quinn.

L. OBAFEMI PINDLING: Son of a former Bahamian Prime Minister. Agent for firms in SC&T deal.

THOMAS F. QUINN: Convicted stock swindler and disbarred lawyer. Relatives were involved in SC&T financing.

GLEN VITTOR: Former president of Sovereign Equity Management, underwriter of the SC&T IPO.

Five Steps to Offshore Riches

1. Phil Gurian, alleged associate of reputed mobster Philip Abramo, sets up Bahamian companies as financial conduits early in 1994. Resident agent is a prominent Bahamian lawyer, L. Obafemi Pindling.

2. In April, 1995, SC&T International sells private-issue stock to the Bahamian outfits for $1.5 million. In April and May, the companies also are sold $1 million in SC&T notes, shares, and stock warrants in a deal arranged by Sovereign.

3. Gurian is alleged to be a hidden control person of Sovereign Equity Management, SC&T's underwriter. Sovereign denies he has any role in the firm.

4. SC&T goes public in December, 1995, and the Bahamian companies--which were among the selling shareholders--cash out at a handsome profit.

5. Money from the Bahamian companies flows back into the U.S. Also cashing in are holders of SC&T debentures sold by Sovereign. They include the wife of Phil Abramo and two relatives of convicted stock swindler Thomas Quinn.