Born to Steal: When the Mafia Hit Wall Street Read online

  “So I just called John out of the blue. I called the Howard Stern office and asked for John—‘John Melendez, please.’ He answered his own phone. I says, ‘This is Ben Salmonese.’ The first conversation was under Ben’s name, because it was his license—if he looked into me, he’d have found I wasn’t licensed. I used Benny’s name, and made him some money. We sold him HOOP [Sure Shot] warrants. I told him, ‘Listen, I’ll buy you twenty thousand warrants. I’ll buy them today, sell them in two days. If I don’t do that, don’t pay for them.’ I was guaranteeing the money. So he said, ‘Sure. Fuck it.’ He didn’t care.”

  Louis was selling a lot of warrants at Brod. He loved warrants. A warrant is a wager on the future price of a stock, and works about the same as a stock option. It gives you the right to get a stock at a certain price sometime in the future. Warrants can be a good investment if you think the underlying stock is going to really grow in value. If you spend a buck to buy a warrant that lets you get a hundred shares of a stock at $5 next year, and you think the stock is going to go up to $10 by then, that’s pretty good, no?

  But Louis never told his customers that. He said warrants were “trading vehicles.” They were pieces of paper that, Louis insisted, were going to increase in price. What they represented, what you could do with the warrant—he didn’t get into that. He simply said warrants were a sure thing. Something you buy at $1 and sell later at $2. Guaranteed.

  What Louis told Stuttering John was pretty much the same pitch that Louis was giving a lot of clients—that the Sure Shot warrants were the next best thing to printing money. Louis was always amazed how it would work. They believed him! Sure Shot warrants were all pretty much controlled—“boxed”—by Louis and Benny and a few other Brod brokers, so Louis knew perfectly well who was going to make money and who wasn’t.

  Louis wasn’t trying to rip off Stuttering John. He really wanted John to make money. He saw to that. He wanted Stuttering John to be happy. He wanted John, the other Howard Stern people—and then Howard himself. The Holy butt-bongo-banging, stripper-ogling Grail.

  “So we opened his account, and bought the warrants for John for about a dollar forty, and sold it for him for something like three dollars in like two days. We made him thirty-five grand, something like that. I think he had only twenty grand he wanted to spend, so he wound up buying maybe sixteen thousand warrants. He was happy as anything. I called him back, and said, ‘You got that sell confirmation?’ He says, ‘Yeah.’ So I said, ‘You can call up Kemper * and find out the balance in your account.’ I’m sure he did, and found out he had like forty-something thousand in there. Then he sent the money. ”

  Sure, Louis wanted referrals. But it was more than that. John was the real thing—a celebrity. Okay, a low-rent celebrity, not too well known outside the New York area or the Howard Stern orbit. But Howard was the King of All Media, and Stuttering John was an important part of the show. He had a band and was selling CDs. A great client. Any legit broker on the Real Wall Street could have told you that. And how many of them could have guaranteed him profits?

  They had to meet.

  “After he sends the check I call him and say maybe we should meet up. So I says Scores, ’cause we had a lot of pull there, not that he didn’t. We met him at Scores. He was with a couple of his guys who worked at the station. When we shook his hand he kind of laughed. He was expecting a totally different situation. I was twenty years old, Benny had a leather motorcycle jacket on, a Michael Jackson jacket. We didn’t really talk about business. We just told him we wanted referrals, and he was, like, laughing, and people were coming over to him and he was goofing on them. He was a goofball. He goofs on people.

  “After a little while, that was it—he wanted to leave. He’s a weird guy. One minute he’s talking to you and the next minute he’s out, done, goodbye. He wants to go. Gets annoyed fast. Strange dude. Gets very on the defensive. Somebody will say something in a light manner, and he’ll answer it back, like, ‘What do you mean?’”

  Meeting John was great enough, but the next morning came Nirvana. He mentioned Louis and Benny on the air! “He said on the air how he thought he was going to meet a thirty-year-old man with a suit and tie, and how instead there’s one guy wearing a motorcycle jacket and was the size of a frigging doorway. The other guy is going bald and looked like a frigging rat. Or something like that, he says—right on the air. He was talking about me and Benny.”

  Stuttering John was good with referrals too. One was Stern’s producer and on-air regular, “Baba Booey,” Gary Del-l’Abate. Louis sold Gary Sure Shot International warrants for $2 to $2.25 each, and the warrants doubled to $4.50. For John, Louis also “worked the spreads.” That was a simple way of making money for him. Louis had just found out about it, and had started to do it for himself.

  The principle is simple. Every stock has two prices, a “bid” and an “ask.” The bid is the price of the stock when a member of the public wants to sell a stock, and the ask is the price when a member of the public wants to buy a stock. The difference between the bid and the ask is the spread, which was huge for chop stocks. Ordinarily it is impossible for customers to buy stocks at the bid and sell at the ask. For a customer to do that, he had to have pull. John Melendez had pull. So Louis did the trades and made money for John, and John had no idea what was happening—only that he was making money. The spread for Sure Shot was something like 3 1/2 bid and 4 1/2 ask, so that was nice money. Louis did the trades at prices slightly different from the bids and asks, to avoid flagging the SEC.

  Through John, Louis and Benny got two other Stern show regulars, Howard’s sidekick Robin Quivers and his writer Jackie “the Jokeman” Martling. Both also profited from trades in Sure Shot warrants. For the Stern show people, this “Ben Salmonese” must have seemed awfully smart—a hot young broker with unusually good market timing. Sure Shot didn’t seem to be a rigged stock. If they had access to even the most sophisticated trading machines, they could see that this was a legit company, that “Ben” worked for a legit, New York Stock Exchange-member brokerage house, and that everything was totally okay.

  One of Stuttering John’s referrals blew them away completely—a young executive at Atlantic Records named Craig Kallman. The hope was that Kallman would be able to give them still other referrals from the music world—who knows? Madonna, maybe. Metallica. Their heads were spinning. They had really reached the big time with Kallman. So Louis and Benny treated him right, making sure Kallman got $70,000 or so in profits, through trades in Sure Shot. Sure Shot was the number one A. T Brod house stock, and for Louis and Benny it was terrific—like running a printing press cranking out hundred-dollar bills. They were running it off for themselves, so why not for guys like Stuttering John and Kallman who could help them out? Kallman “made it seem like he could get everyone in the world to get us money,” said Louis.

  Louis and Benny both started to fantasize, just a little, that maybe these guys, these legit people, could be their tickets to the Real Wall Street.

  part three

  LEGENDIZED

  CHAPTER NINETEEN

  The Real Wall Street didn’t know they existed. They didn’t have publicists planting stories about them in the financial press, and the media usually ignored their world. But that was okay. Louis and Benny were known among the people who counted. Their people. “We legendized ourselves on Wall Street. It was ‘Benny and Louie.’ We were known,” says Louis. “Every firm was calling us to do business. L. T. Lawrence. First Hanover. They were calling us, making us offers. Sign-up bonuses. Fifty thousand. A hundred thousand.”

  They had to start thinking about the future. Well, not the future, exactly. They were actually thinking about thinking about the future. Louis and Benny never really planned, but they started to look ahead to the time when they would want to plan. They began to realize that with the referrals they were getting from Stuttering John, and hoped to get from Craig Kallman, maybe, just maybe, they could get clients for whom they could actually m
ake money, who could enable them to cross that seemingly unbridgeable, unimaginably huge gulf that separated a former blow dealer and a community college dropout from that other Wall Street, Al Brod’s Wall Street, A. T. Brod’s Wall Street before they came to A. T. Brod and turned it into a chop house. Maybe they could start getting real commissions and sell real stocks. Maybe they could get into the world that was all around them, the Real Wall Street.

  All they needed were enough big-bucks clients, clients with names, cool clients who would trust them with their money. No problem.

  By the end of 1994 they were getting clients who would have been the envy of any brokerage firm on Wall Street. And not just more friends of Stuttering John, who was hanging out with them, and Brod broker Marco Fiore, more and more. They did it without connections, without referrals from John or Craig Kallman or Al Brod or the old fucks sipping tomato soup in the Whitehall Lunch Club, for that matter.

  Louis and Benny were easing into the Real Wall Street in the classic way—by being in the right place at the right time and by working. Always working. Always be closing. They didn’t go for that Glengarry Glen Ross crap in theory but they embodied it in practice. That was how Louis and Benny got Clifford Hicks, a punt returner for the New York Jets. No connections. Just old-fashioned balls, the kind of balls even the Real Wall Street would have admired. Going to a Jets game at the Meadowlands, and always working. Networking. Just as the white-shoe firms taught the recruits from Penn and Yale, only no white-bread fuck could have gotten Clifford Hicks as a client.

  “We went to go see a Jets game and we had front-row seats so they could hear us. We were on the fifty-yard line right behind the Jets bench, so the players would notice us. Then afterward behind the stadium we went back to where the players leave, and we got Clifford Hicks’s attention. He came over and started talking with us. We were just bullshitting about the game, we were being friends. We said we were brokers and we wanted a shot at making him some money. We guaranteed it to him. Told him we’d invest maybe five grand and make him twenty-five thousand. We were going to multiply his money. And he was interested, he said to give him a card or a number. Benny had a card on him. So we gave him the card. A couple of days later he called, left a message, and then I pitched him, and he sent five grand. We made him his twenty-five thousand or whatever and he started giving us referrals. He was our hook.”

  This was a lousy season for the Jets, but it was a great season for Louis and Benny, and now it was going to be a great season, financially, for Clifford Hicks and the players he started to refer. That was the plan. Everybody was going to make money—Louis, Benny, Clifford Hicks, his friends on the Jets, Stuttering John and his friends, Craig Kallman and his friends. Everybody. Everybody Louis and Benny wanted to make money.

  “We made these guys great money. For Clifford Hicks of the Jets—we bought him the Sure Shot warrants, traded his account, took him in at the bid and out at the offer, made him money. Once I called him and I said, ‘Hey, Cliff, I’m going to send you a check for twenty-five thousand.’ And he says, ‘Get the fuck out of here, man.’ I say, ‘I’m serious.’ He says, ‘Fucking great, man.’ And I say, ‘All I want you to do is introduce me to some of the boys.’ He says, ‘No doubt.’ And he starts having them call. Alfred Oglesby called us. He says, ‘Yeah, my boy Cliff, ya made some money. I wanna know how to get in on it.’ That’s how they talk to you. It’s funny how they used to talk. Johnny Mitchell wasn’t like that. He was an intelligent guy. An educated black man. He had big money. He used to make a million and a half a year.”

  Like the Stern people, the Jets players had business managers and accountants. But no private banker promised the kind of really great short-term trading profits that Louis and Benny were able to provide. Legitimately, for all the players knew. Benny had a clean record, and his name was on the confirmations. A. T Brod was a clean firm, ignored by the press just as consistently as Hanover was ignored by the press. For all anybody could have known, these were two really great, hungry brokers, as terrific as traders as they were young and cool. Other brokers couldn’t even attempt the awesome trades these guys were able to perform. Other brokers didn’t promise big bucks and then deliver. But Louis and Benny weren’t ordinary brokers. It was as if they were bookies who, somehow, had an uncanny ability to forecast the results of horse races. Who wouldn’t want a bookie like that?

  True, it wasn’t as if nobody was going to be ripped off. The money had to come from somewhere, no?

  Louis and Benny came up with a plan, beautiful in its symbiotic simplicity. They would have two types of clients—the Nobodies and the Celebrities. The idea was to get millions of dollars from the Celebrities, luring them in with the kinds of great, profitable trades that had made money for Stuttering John and the rest. They would put all those millions into solid New York Stock Exchange companies, mutual funds—real investments. Real Wall Street-type investments.

  The Nobodies, the imbeciles at the other end of the cold-calls out in rural America, would pay the freight for the Celebrities. Their losses would subsidize the gains for the Celebrities, and they would be on the losing end of the trades that would be winners for the Celebrities. When Louis sold those Sure Shot warrants for the Celebrities like the Stern people, the Nobodies would be the buyers. And the Nobodies couldn’t sell. Fuck ’em.

  Having big accounts from Celebrities, accounts with real stocks and cash and so on, would serve another purpose vital for the operation of a chop house. Louis would be able to “park” stocks in the Celebrity accounts, on occasion, when it was necessary. Such as when a Nobody wanted to sell stock. If Louis couldn’t talk him out of it, he might have to try to get the Nobody out of the stock just to keep the jerk from running to the NASD. Louis would have to get rid of the shares. That is where “parking” came in.

  “You need time to sell a chop stock. You couldn’t just sell it in the open market, you know. I figured I could put the chop stock in the Celebrity account for a couple of days, to give me time to unload it. I would give the Celebrity maybe thirty cents a share when I sold it. This way I wouldn’t have to park the stock illegally while I was finding a buyer. You could park it legally with the money in the account. These sports guys wouldn’t even ask what we were doing.”

  Besides, it was great hanging out with these guys. Clifford had all his teammates sign a football for Louis, and soon their signed jerseys, suitably framed, were on their office walls. They started hanging out. As friends, sort of. Louis and Benny were so close to the Jets’ running back Brad Baxter that he called them once to pick up his dog at the airport and take it to his apartment. And they did it. They weren’t his bitch boys, weren’t Sally Leads. They were just doing what private bankers in the Real Wall Street did for their best clients.

  They were legends, these guys. Clifford Hicks and Johnny Mitchell and Oglesby. Brad Baxter, who lived in Manhattan and also hung out at Scores. Then came the placekicker Nick Lowery and others. Referrals led to more referrals and soon they got five-time middleweight champ Vinnie Pazienza.

  All great guys. All making money thanks to Louis and Benny.

  Sure, the market was having tremors in the mid-1990s. IPOs were hot, and then cold, and then hot again. A smart broker didn’t need to worry about the market all that much. A smart broker created his own bull market. In early 1995, when Louis and Benny saw their biggest paychecks at A. T Brod, the dot.com, high-tech boom had not yet begun. But the best of the chop house kids had their own system for printing money, and Louis was becoming a master at it.

  New clients would be generated by the cold-callers and Louis would “second trade” them—he’d zero in for the all-important sale of the chop stock or warrant. And once they got the chop stock he would do “crosses”—basically have the customers selling stock back and forth so that he could get more money out of them. Second trades and crosses. Second trades and crosses. It was the chop house mantra. It was that and it was more. A lot of paperwork and bullshit and dealing with the publ
ic. Dealing with the public was a bitch.

  Their cold-callers might have had the impression that they were slouches, waltzing in late lots of the time, partying, leaving supervision of the cold-callers to Sally Leads and Chris Votas. But they couldn’t see all the work involved, all the planning it took to get things humming.

  When things were going good, Louis and Benny’s well-oiled cold-calling machine operated so smoothly that they only needed to work for two weeks out of every month. But there was a lot going on behind the scenes. When customers complained and couldn’t be shut up, the call had to go in to Shannon Johnson, an ex-Nasdaq official who worked at Hanover for a while and was the guy the chop house crews relied on to expedite license requests and placate customers. Shannon ran a consulting firm in Maryland, not far from Nasdaq headquarters. “Call Shannon”—that was the credo. Shannon was the Man. The cold-callers, seeing Louis come in late every day, not attending meetings, didn’t know about Shannon and how important he was. They didn’t know about boxing stocks—keeping them under control—or crosses and didn’t care, because they didn’t have to care.

  Crosses were a bit complex, but the principle was simple—Louis had customers selling stocks to each other. For that to happen, about half of the clients had to be in one chop stock, and the other half were in another.

  “I remember one time I had something like a hundred thousand shares of Sure Shot, and a hundred thousand shares of Sport Sciences ‘in my book,’ meaning they were owned by my clients. I think Sports Sciences was three dollars bid and three seventy-five ask. Sure Shot was three and a half bid and four ask. I wanted the clients to sell their Sports Sciences and buy the Sure Shot. The clients that owned the Sure Shot were going to sell that, to buy the Sports Sciences. That’s crossing.