Indictment Links Wall St. Fraud, Organized Crime

Two licensed stockbrokers and a man allegedly associated with the Colombo crime family were charged with stock fraud and other crimes involving a Los Angeles-based company, federal prosecutors in New York said Friday.

The criminal indictment is the first to directly link organized crime to fraud on Wall Street, said the U.S. attorney’s office in Brooklyn, which is prosecuting the case. The Colombo family is one of five alleged organized crime families in New York.

Louis Malpeso Jr., an alleged associate of the Colombo family, and Joseph DiBella and Robert Catoggio, two stockbrokers, all were charged with conspiring to inflate the price of Los Angeles-baed First Colonial Ventures Ltd.’s stock and conspiring to commit mail and wire fraud.

DiBella and Catoggio at the time were working at Norfolk Securities Inc., a brokerage in Manhattan that has since been disbanded, the U.S. attorney’s office said.

First Colonial Ventures shares trade on the Nasdaq Bulletin Board, a barely regulated market for small stocks. They closed at $1 on Friday, down 12.5 cents.

Malpeso, federal prosecutors said, allegedly loaned $100,000 to a stockbroker, John Burnham, and threatened to hurt him when he couldn’t pay the $3,000-a-week interest.

In January 1996, the broker turned to authorities for protection and agreed to cooperate with them, the U.S. attorney’ office said.

Malpeso, DiBella and Catoggio allegedly planned to satisfy Burnham’s debt and profit by buying First Colonial’s stock through an undercover investment firm posing as Burnham’s new employer. They allegedly planned to inflate the shares’ market price, then sell the stock, the U.S. attorney’s office said.

DiBella and Catoggio agreed to pay a kickback of 25% of the shares’ sale price to an undercover agent posing as an employee of Burnham’s new firm, prosecutors said.

Federal authorities intervened before the plan could proceed.

Malpeso, Catoggio and DiBella face a maximum of five years in prison on each count of stock and mail fraud. Also, each one faces a maximum fine of $250,000 per count and restitution, prosecutors said.

First Colonial President Murray Goldenberg in March told The Times that he had no reason to believe his shares had been manipulated by mobsters.