Archive

Ex-exec at Stratton Oakmont guilty of fraud — again

A former executive at Stratton Oakmont, a notorious boiler room, has been found guilty of securities fraud — more than 11 years after he was kicked out of the industry by NASD Regulation.

A former executive at Stratton Oakmont, a notorious boiler room, has been found guilty of securities fraud — more than 11 years after he was kicked out of the industry by NASD Regulation.
Irving Stitsky, a former managing director and junior partner at Stratton Oakmont, and two colleagues stole more than $18 million from 150 investors using phony or ginned-up private placements, according to a statement released yesterday by the U.S. Attorney’s Office’ for the Southern District of New York.
Mr. Stitsky, along with Mark Alan Shapiro and William B. Foster, operated a group of companies under the name “Cobalt,” which claimed to acquire and develop real estate properties throughout the United States.
In the brokerage industry, Stratton Oakmont’s name is almost synonymous with the phrase “boiler room.” Stratton brokers in the 1990s used high pressure tactics to sell investors an array of initial public offerings, many of which turned out to be worthless.
Regulators shut the firm down in 1996, and in 1999 the firm’s two founders pleaded guilty to counts of securities fraud and money laundering.
Because of NASD rules, investors since 2000 could not check Mr. Stitsky’s record and background in the securities business with the NASD, which evolved into Finra in 2007 after its merger with NYSE Regulation Inc.
After two years — regardless of their standing in the industry — brokers’ records are taken down from Finra’s public web site, called BrokerCheck.
The lack of information about barred brokers like Mr. Stitsky, however, is changing. Earlier this month, Finra, the brokerage industry’s self-policing body, said it had won approval from the Securities and Exchange Commission to expand the BrokerCheck Service and make disciplinary records available permanently. (Click here to read the full story).

According to the U.S. attorney’s office, the three Cobalt executives lied about the company’s history and caused others to lie to investors about Cobalt’s ownership of certain properties. Mr. Stitsky and Mr. Shapiro also failed to tell investors they were convicted felons.
Shapiro, 60, previously served 30 months in prison after pleading guilty to bank fraud and conspiracy to commit tax fraud, according to the Justice Department complaint.
Stitsky, 55, has also plead guilty to fraud charges, including conspiracy to commit securities fraud, wire fraud and commercial bribery in the Southern District of New York in Manhattan and of making false statements and of conspiracy to commit securities fraud in the Eastern District of New York in Brooklyn, according to the complaint.
Lee Ginsberg, a lawyer for Shapiro, and Denis Patrick Kelleher Jr., a lawyer for Stitsky, said yesterday that they plan to appeal the convictions, according to a Dow Jones report.
After a three-week trial, Mr. Stitsky, Mr. Shapiro and Mr. Foster, 69, were also found guilty of wire fraud, mail fraud and conspiracy charges. They will be sentenced in February. They face up to 20 years in prison on each fraud charge. Mr. Shapiro and Mr. Stitsky were ordered jailed, pending sentencing.