Between 1992 and 1997 the Manhattan securities firm Meyers Pollock Robbins (now closed down) used high-pressure sales methods to sell worthless stock at inflated prices to more than 16,000 investors in the US, UK and elsewhere. The technique, known as 'pump and dump', is featured in the current movie Boiler Room about Wall Street crime, and is frequently used to dupe investors, despite its simplicity.
Classically, a fraudulent brokerage picks a sleepy stock on a little-known, offshore stock market, and buys up its cheap shares that no one wants, or even lists a stock itself. Then the brokerage 'pumps' up the stock by a sudden buying surge, placing false rumours in the financial press and so, and sets to work to sell them in bulk to unwitting investors. Having inflated the stock to ridiculous levels, and having parked the money in offshore bank accounts, the brokerage then 'dumps' the stock and its investors just by walking away.
44 people from Meyers Pollock Robbins were indicted recently by Manhattan prosecutors after an investigation lasting years. Investigators said some of the 44 had previously been employees of other crooked brokerages, including A S Goldmen, Stratton Oakmont, Westfield Financial and Hanover Sterling. However, prosecutors said there was no evidence of widespread coordination among the firms and no evidence of the involvement of traditional organized crime groups.
The long delay in bringing the accused men to trial reflects the difficulty investigators face in disentangling international scams, and the firm's use of bank accounts in the Isle of Man, Jersey and Guernsey.
Although these offshore jurisdictions are willing to co-operate with international investigators, and have laws to enable mutual co-operation, they apply complex judicial procedures to such investigations in the interests of preserving banking secrecy and the rights of depositors.
The Channel Islands were used in the scam not only to park proceeds from share sales, but also to establish some of the stocks which were pumped up.
Robert M Morgenthau, Manhattan District Attorney, said the investigation had been hampered by state money laws. ''One of the problems we have is that New York State's money-laundering statute is weak,'' he said. ''That's something we've been trying to change for years.''
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