Former Mafia Prosecutor Focuses on White-Collar Crime

by Melissa Davis - 10/12/2009 4:18:26 PM

Gregory J. O’Connell, a founding partner of New York-based De Feis, O’Connell & Rose, has successfully prosecuted Mafia bosses, represented multimillionaires accused of white-collar crimes and even scored a feature role in the latest book published by Jordan Belfort, the so-called “Wolf of Wall Street.”  In short, at this point in his illustrious career, O’Connell needs no introduction. Belfort penned such a colorful one in his new book, however, that it would be a crime to skip past the opportunity to share it here.

“I had always known that Magnum (Belfort’s nickname for O’Connell) was the perfect lawyer for me,” Belfort wrote in an early chapter of Catching the Wolf of Wall Street, his popular sequel to a bestseller that’s been optioned for a movie by Martin Scorsese. “I’d even looked past the fact that standing next to him made me feel like a shrimp. And in the end, look how well things had worked out!

“By sheer coincidence, my lawyer was friends with the judge, which meant he would wink at the judge ever so subtly just as the judge was about to announce my sentence, at which point the judge would nod back at Magnum just as subtly and then say, ‘Jordan Belfort, in spite of the fact that you stole a hundred million bucks and corrupted an entire generation of young Americans, I’m sentencing you to twelve months’ probation and a one-hundred-dollar fine.’”

For his part, O’Connell quickly corrected Belfort by describing the judge as “completely legitimate” and a possible candidate for the Supreme Court one day. The former prosecutor arranged for Belfort to cooperate with the government instead. As a result, Belfort wound up serving 22 months in prison for crimes that could have otherwise brought him more than 30 years in jail.

In a recent interview, O’Connell discussed his famous client and securities fraud in general. He also portrayed The Street Sweeper as a potentially powerful weapon in the ongoing fight against corporate crime.

The Street Sweeper: Belfort ranks among your most prominent clients. How do you feel about Belfort’s books – which offer a detailed look at his rise and fall on Wall Street – and why do you think he wrote them?

O’Connell: The books are very entertaining. Jordan is a colorful character. He’s also somebody who, I think, wrote those books as somewhat of a catharsis for himself. He doesn’t hold back, he doesn’t minimize what he did wrong, and he takes full responsibility for his actions. He basically gets the reader past wanting to string him up. He is in fact remorseful. He did serve his sentence, and he continues to pay restitution.

The Street Sweeper: Belfort now travels the globe delivering speeches on the importance of ethical business practices. In your view, what can he teach the public that others – who never committed securities fraud – cannot?

O’Connell: He was a very prominent player in the pump-and-dump schemes of the 1980s and the early 1990s. He’s incredibly savvy about the mechanics of those operations. So he’s in a position to help investigators identify such schemes and impose controls to prevent them.

The Street Sweeper: You represented Hunter Adams, a member of The Street Sweeper’s expert advisory board, who also served time for securities fraud. Like Belfort, Adams now hopes that Americans can capitalize on the tough lessons he has learned. Through The Street Sweeper (and later American Fraud Busters), Adams plans to take direct aim at white-collar criminals and other con artists. How do you feel about those projects?

O’Connell: I think that the government is actually hungry for assistance in identifying people engaged in those types of activities, and that Hunter is uniquely situated to provide assistance in that regard. I think it would be welcomed by government investigators. Any solid leads that he could provide to help them ferret out criminal schemes in the securities industry – and other industries – would be of enormous benefit.

The Street Sweeper: The crimes committed by Belfort and Adams actually pale in comparison to the multibillion-dollar Ponzi scheme carried out by Bernie Madoff. How did Madoff manage to cause so much damage -- while escaping justice -- for so long?

O’Connell: The Madoff case is exceptional in demonstrating the incompetence of federal regulators, and state regulators at times. There was so much information provided directly to the SEC (Securities and Exchange Commission) by members of the investment community. They provided written analyses showing that it was impossible for Madoff to generate the kind of returns that he had. They couldn’t have done more, except take out a billboard outside of the SEC’s offices, to advertise Madoff’s operation.

That seems to be a case where Madoff’s stature in the investment community stood as a sufficient barrier and created enough inertia to prevent the SEC from being as aggressive as it should have been. The lesson to be learned here is that -- regardless of who the target might be -- federal and state regulators should heed the warnings and focus on the facts. And I think that’s what you’re going to see them doing in the future.

The Street Sweeper: Madoff now stands out as the ultimate symbol of greed on Wall Street. After wiping out his loyal investors, he will now spend the rest of his life behind bars. Do you think justice has been served?

O’Connell: He was sentenced to 150 years. That’s essentially a life sentence with no hope for early release. In the current federal system, the public should be satisfied that extremely harsh sentences are being imposed in these white-collar cases.

The Street Sweeper: Government authorities, accused of lax oversight of the securities industry, have vowed to be more vigilant going forward. In your opinion, what steps must the government take in order to better protect the public?

O’Connell: I think that the SEC is being reorganized with very talented people. They’re eliminating layers of bureaucracy, and they’re making efforts to structure the agency so that it is much quicker to react to information than in the past. I think that can make a very profound difference in the SEC’s ability to be a fast and efficient investigative agency. Then it will be able to target more serious offenders on a faster schedule, which should mean better results and protection for the public.

The Street Sweeper: With regulators busy cracking down on massive securities scams, how can they address the smaller schemes – such as risky penny-stock promotions – as well?

O’Connell: The SEC just sets its priorities. Any case that has merit can be reviewed by the agency. They set a high priority, for example, on insider trading cases, regardless of the amount of money involved. We’ve represented clients in cases where the profits from alleged insider trading were less than $20,000 and, in other cases, where they were millions of dollars. So it’s not necessarily the amount of money involved. It’s really the nature of the conduct.

The Street Sweeper: How rampant – and dangerous – are so-called “pump-and-dump” schemes?

O’Connell: It’s hard to tell. As a practical matter, we only know about those pump-and-dump schemes that have been identified. There were a spate of prosecutions and investigations in the 1980s and 1990s, and then there seems to be a period where they leveled off after that. I suppose it was the result of deterrence created by the aggressive SEC investigations and Department of Justice prosecutions of the individuals involved. I think, as a result of that, interest in participating in those sorts of operations sort of waned. However, there seems to be an indication that it’s reemerging. So it’s like anything else. If the government keeps the pressure on, the type of criminal conduct involved might lessen. But once they remove the pressure and focus on other things, those kinds of activities can reemerge pretty quickly.

The Street Sweeper: Before representing high-profile clients in white-collar crime cases, you made a name for yourself by successfully prosecuting Mafia leaders. The Mob later branched out and tried to exercise its influence on Wall Street. What ever became of those activities?

O’Connell: I don’t think the Mafia ever made a serious inroad into Wall Street. When people think of Wall Street, they think of the great broker-dealers – the Merrill Lynches of the world – and the Mafia never had any influence over the giants on Wall Street. They did, however, infiltrate smaller broker-dealer operations that were involved in pump-and-dump schemes. They did that simply by using their traditional fear tactics and obtaining control over the principals of these small operations. However, I can’t really think of one case where there was a member of any of the five crime families who actually participated in a broker-dealer firm. Rather, they would shake them down and extort money from them.

The Street Sweeper: In your view, which poses the bigger threat to the American public today: organized crime or securities fraud? Why?

O’Connell: It’s hard to measure which could do more damage. Years ago, the Mafia had infiltrated various industries including, to a limited extent, broker-dealers. But in the 1980s and 1990s, the U.S. Attorney Offices in both the Southern and the Eastern Districts of New York successfully prosecuted generations of leadership in all of the crime families. It pretty much decimated them. So the Mafia has lost a lot of its clout.

Securities fraud, however, still occurs at all levels, from the low-level broker-dealers to the higher echelons of the major Wall Street houses. It takes a lot of vigilance on the part of the SEC and the Department of Justice to curb criminal behavior throughout the ranks of that industry. If it were allowed to run amok, it would undermine our entire financial system. So one could say that the threat of criminal conduct and corruption in the securities industry poses the greater risk to our country.

The Street Sweeper: How well do the punishments for those crimes match up to the actual damage that they cause?

O’Connell: Since the Enron case emerged, the federal sentencing guidelines have been amended, and it has actually reached a point where sentences were being imposed on white-collar defendants far exceeded those being imposed on violent criminals. In federal courts, the sentences went to too harsh from far too lenient. There needs to be proper balance. Current trends are actually to make the sentences in these white-collar cases more reasonable.

The Street Sweeper: By now, you have both prosecuted and defended a number of big-time white-collar criminals. Looking back, which cases – as a prosecutor and as a defense attorney – were your favorites?

O’Connell: The highest-profile cases I handled as a prosecutor involved the bosses of several crime families, and some of that activity was actually white-collar in nature. Other cases involved a lot of murder and mayhem as well. When I reflect on my career as a prosecutor, I think more of prosecuting the entire hierarchy of the Lucchese family and other crime families. But I was just one of several prosecutors, along with a legion of FBI agents and detectives of the New York City Police Department, who made a huge dent in organized crime in the late 1980s and early 1990s.

As an attorney, the cases I am most proud of really are those cases where we succeeded in persuading the government that their initial perception of our clients was in fact wrong, and those clients were successfully protected from unwarranted prosecution. I’d put that at the top of the list in terms of what is near and dear to me.

The Street Sweeper: At this point, you’ve handled enough interesting cases to write your own bestselling book. What are your plans for the future?

O’Connell: I’ll just continue to try and do my best to represent our clients effectively and to get great results. That’s enough for me right now.