Nothing But Money (18 page)
Authors: Greg B. Smith
They began the usual Wall Street dance, each trying to discern if the other had something to offer. In no time at all, Cary had mentioned he was once a partner at Bear Stearns and had gone out on his own. He was vague with details. He dropped that he had an MBA from Stanford, and mentioned that he worked out every day for two hours. Warrington was beginning to drift, watching the beautiful blondes with tan lines float by in a dream, when Cary suddenly got his attention.
“I’ve got blocks of stock with a 40 percent discount,” he said.
Warrington was aware of the ramifications of a 40 percent discount. He’d heard stories of brokers getting stock at a discount, usually 10 or 15 percent, which was really just a bribe. The broker would sometimes split the discount with his customer, or sometimes not mention it at all. It depended on what kind of guy you were. At that time, Warrington was the kind of guy who had nothing to do with discounts, but 40 percent certainly caught his attention.
“What are you taking home right now as a broker?” Cary asked.
“One hundred fifty a month,” Warrington said, not sure if that was good or bad.
“What’s your net?”
“It’s three fifty net.”
“That’s shit,” Cary said.
That let the wind out of Warrington’s sales. He’d thought he was doing great. He was a top producer at Gruntal; he was able to buy pretty much whatever he needed and never had to ask his father or, worse yet, his stepfather for help. He said nothing in reply.
“I can show you how to gross one million dollars a month,” Cary went on. “You’re buying big board stocks; you’re wasting your time. I’ll show you how to make some serious green.”
He pulled out a roll of $40,000 wrapped in a plain rubber band. Although he was drinking someone else’s top-shelf liquor on a multimillion-dollar yacht, amidst people who possessed stock portfolios that could single-handedly pull certain small Latin American countries out of debt, Warrington could not take his eyes off that roll of bills. It was so real. It was naked money.
He leaned forward to hear Cary Cimino better. He didn’t want to miss a word.
CHAPTER SIXTEEN
By now, Jeffrey Pokross was a stockbroker himself. He’d taken the seventy-five-minute Series 63 exam to become a securities agent, a low-level requirement for anyone assisting a registered broker. He’d scored an impressive 92. Then he’d taken the six-hour Series 7 required of all registered stockbrokers. This allowed him to solicit investors and buy and sell just about every type of security imaginable. He scored a reputable 88. Here was a guy who’d lived his entire life in New Jersey and Queens and for the first time he was entering the high-stakes, high-finance world of Wall Street. The car leasing operation had collapsed in a mountain of debt. Here was the new tabula rasa Jeffrey Pokross, stockbroker.
Actually he was still the old Jeffrey Pokross. The fact that he had actually been handed a license to handle other people’s money was remarkable indeed. That meant he had undergone a background check by the National Association of Securities Dealers. If they had taken a close look, they would have had quite a bit to jot down in their little notebooks.
On his U4, the form filled out by all prospective brokers, Jeffrey had mentioned a few civil matters, most of which arose during his adventures in car leasing. Most were law-suits filed against Jeffrey and his company, Three Star, by irate customers. They were usually filed under the heading “Unpaid consumer credit obligations.” All were noted as being settled, with Jeffrey agreeing to pay off what he owed a bit at a time from “future earnings.” In explaining himself to the NASD, he’d minimized his culpability, insisting in some cases that he was merely covering the obligations of others. Others he couldn’t pay because, he would explain, “I did not want to go into bankruptcy and decided to attempt to make payments rather than default to creditors.” He owed the state of New Jersey $10,400 in back taxes and fines, and he hadn’t even bothered to pay off the $2,397 he still owed in college loans.
Pokross did not bother to mention (and the NASD apparently didn’t know) that he was also being sued by the U.S. government. The Resolution Trust Corp., which was sorting out the savings and loan mess, had discovered Jeffrey and his car leasing company had skipped out on numerous loans in their effort to keep their car-lease Ponzi scheme afloat. By 1993, the year he took the Series 7 and 63, his car leasing scam had racked up $1 million in debt.
Nevertheless he got his license, and immediately went to work breaking laws and regulations as fast as he could.
He started at Barrington Capital. This was, in the parlance of the day, an upscale boiler room, a roomful of brokers—some of whom had actual licenses, others who would pretend to be the guy with the actual license who cold-called investors around the country pitching specific stocks. Usually they targeted senior citizens and people who lived in the Midwest. The operating assumption was that if you lived in the Midwest, you were a drooling rube who might be a genius about cow breeding methods but was surely dumb as a fence post about securities. The other operating assumption was if you were a senior citizen you had plenty of time on your hands, might be a little lonely and thus would actually stay on the phone and listen to another human voice for a few minutes, even if that voice was owned by a felon. You were, in effect, a perfect target for people like Jeffrey Pokross.
In 1993 and 1994, Pokross and the other brokers at Barrington were hyping their own version of “house stocks,” barely traded securities that Barrington was being paid to take public. Most of the company’s stock was, in fact, owned by the brokers—at discount rates. The brokers were paid a commission based on how much stock they sold. Sometimes the company bribed them outright by giving them free stock or even cash in envelopes. The idea was to call up the retired postal supervisor in Moon Pie, Missouri, and go to work on the guy. On and on the broker would blather about how Company X was about to go public and if you acted now you could get in on the ground floor at bargain basement prices; once it went public, all bets were off. A key element was to intimidate the yokel into believing that he was, in fact, a yokel if he didn’t jump on this deal right away. Questioning the customer’s manhood often did the trick. Most boiler room brokers preferred to deal with men because women would commit to buying and then change their minds. Men were easier to buffalo.
And buffalo Jeffrey did. He would eventually admit it all, and even testify in court about it. His description was terse but candid: “I made baseless and unrealistic predictions on where I thought the stocks would go to push it out, push the stocks out to the customers to get more commission.”
In other words, he lied to line his pockets. This did not always work in his favor.
Months after landing the Barrington job, the firm pushed him to purchase a particular stock at $40. “A couple of days after I put the stock out to my customers—a lot of stock—the stock went down by more than 50 or 60 percent within a few days. Well, anytime that you sell a stock as a stockbroker and the customer doesn’t pay for the stock, the broker gets the bill for the difference. It caused me a great amount of difficulty to continue to do business at Barrington, and the firm was looking to collect $40,000 in losses for their recommendation.”
It was time for another job. This time Jeffrey set his sights on a relatively big-time firm, Gruntal & Co. At that time, Gruntal was the fourteenth largest brokerage firm in America. It had been around since 1880, survived the Crash of ’29, gone public in the 1980s and was now a worldwide concern with two thousand employees in thirty offices. By June 1994, Jeffrey Pokross had peaked in his career as a stockbroker by landing a job at Gruntal.
At Gruntal, Pokross was forced to deal with real rules and real oversight. He had to sell stock in real companies regulated by the New York Stock Exchange. No more “house stocks.” It was more complicated dancing around the rules at Gruntal, but Jeffrey found a way. Some customers require that a broker tell them before they either buy or sell a stock. Jeffrey Pokross decided to skip that requirement for a number of customers. At first, this wasn’t a problem. But ultimately when they got their statements and found he had used their money to buy stock in a company that promptly tanked, they were a tad miffed. One customer even called him up and recorded the call. In the call Jeffrey promised to cover the loss as long as the customer didn’t mention this little matter to his boss. The customer got off the phone and promptly sent the tape to the compliance officer at Gruntal. Soon, Jeffrey had some explaining to do.
“I got fired immediately. It virtually eliminated me getting a normal job, because when you get hired, you have what’s called a securities license. When you get fired, there is a form called a U5, which is an electronic computerized record of the brokerage license. Any type of black mark where you get fired for doing an unauthorized trade, it’s a very bad thing and practically no firm would hire you after that.”
As more and more customer complaints filtered in about Jeffrey Pokross, he slunk out the back door of Gruntal and returned to the underworld of the boiler room. This time, without a license, he recast himself as a stock promoter and took a job at a firm known as La Jolla Capital.
In the early 1990s, as Wall Street began again to show signs of life after the 1980s debacle, more and more brokerages like La Jolla began showing up in the over-the-counter market. These operations were 100 percent devoted twenty-four and seven to the fine art of removing money from their customers’ pockets by any means necessary. Jeffrey Pokross fit right in. At La Jolla, Pokross and thirty other unlicensed brokers sat in a shabby office on John Street a few blocks north of Wall and pitched stocks using the name of a registered broker, Robert Grinberg. That meant at any one time, more than thirty Robert Grinbergs could be making simultaneous phone pitches to various victims across the country. Pokross started taking cash bribes to hype house stocks, but he also learned other interesting lessons: “For La Jolla Capital, it was incredibly profitable . . . I learned the means and methods of getting ahold of a very inexpensive piece of stock, manipulate it, control the trading on it and make a ton of money by bribing brokers.”
Manipulation of stock was a nice way of saying La Jolla lied to investors each and every day about what they were doing with their money. At La Jolla, Jeffrey Pokross learned that manipulation really meant pump and dump.
By the mid-1990s pump and dump was a growing phenomenon on Wall Street. Before a company went public, secret partners bought stock at ridiculously discounted rates or were simply gifted stock for free. The company itself usually existed on paper or in overseas bank accounts. When the company went public, stock promoters like Jeffrey Pokross were paid cash bribes to hype the stock and pump up its value. Real licensed brokers were also paid cash bribes to pump the stock, but also to make sure the customers didn’t get cold feet and try to sell. If a customer put in a sell order, these brokers would frequently ignore them or try to convince them to stay put. If that didn’t work, the broker was responsible for finding another customer to replace the seller.
Brokers would say practically anything to hook the customer and keep him. Take the selling of Jutland Enterprises. Here was a company that had acquired the rights to (but not the property of) a sandwich shop with two stores called Yellow Submarine. That was it: two delis. Why would any right-thinking, marginally intelligent citizen of the United States invest even one cent of their hard-earned paycheck in such a company? Because they were told lies. Jutland was the “next McDonald’s.” Jutland was planning to expand its operations to compete with Starbucks. Jutland stock would rise 100 percent. Jutland was going to be bought out by another company. You were selling an idea, a possibility. You weren’t really selling anything real. It was all nonsense.
Soon Jutland’s total market value was $68 million, despite the fact that it had never turned a profit, had suffered loss after loss, and was, after all, just a couple of delis. Investors lost tens of thousands when the insiders dumped their stock.
At some point when the secret partners felt the time was provident, they’d dump all their stock at once. The resulting sell-off would cause the value to plummet, and those that still owned would take it on the chin. In effect, the partners used unsuspecting investors to create the illusion that a bogus company was really a rising star, just long enough to make a killing and get out.
Jeffrey was well schooled in the ways of Wall Street. He had a quick mind for numbers, knew the jargon up and down. He also had larceny in his heart. Pokross was the perfect guy for this game.
December 1995
It was that time of year once again. Outside the Exchange, a secular institution if ever there was one, they’d hung pine boughs and twinkling white lights in a gesture of goodwill. “God Rest Ye Merry Gentlemen” and “Rockin’ Around the Christmas Tree” drifted from stores. End-of-the-year bonus checks were in the mail, and the holiday parties—“bacchanalian” as a description didn’t do them justice. Money was rolling in on the new technology stock wave. Dot-com mania had set in. There was irrational exuberance to burn. Down at Joseph’s Restaurant, a few blocks from Wall Street, the bar was jammed on a Friday after a long week and Jeffrey Pokross was happy to be alive.
Tonight was a big night. His wife—who almost never came into the city from their suburban paradise in New Jersey—had decided to fling caution to the wind and see what there was to see. She sat at a bar stool in the middle of the roar and din that was a holiday party thrown by his newest firm, Monitor Investments. A few months into his time at La Jolla, he’d been lured away to what he believed was unlimited opportunity at Monitor. The place was packed with brokers and stock promoters of all types. The firm’s big clients were all invited to drink up the open bar as fast as they could, and most were happy to oblige. Pokross and his wife sat next to each other at the bar, where he could command a view of the people he needed to talk to and the people he needed to avoid.
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