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NEW YORK — A Wall Street brokerage firm collected $6.2 million in illegal fees by duping hundreds of investors into buying stocks at inflated prices, a prosecutor said Wednesday.
An indictment charged owners Joseph Sorbara and Steven Markowitz and 15 former employees of the now-defunct Joseph Stevens & Co. Inc. with enterprise corruption, grand larceny and other felony counts. They were to be arraigned later Wednesday in state Supreme Court in Manhattan.
About 800 people were victimized by the scheme involving 5,000 trades between 2001 and 2005 that totaled $151.3 million, District Attorney Robert Morgenthau said at a news conference. Many of the victims were retirees, doctors and other professionals who lost much of their life savings, he said.
Prosecutors allege brokers would commit to buying a large block of shares at a discount, then wait until the stock ticked up in value before buying it for clients at the higher price.
"The brokers never told their customers that their primary reason for recommending the stock was to earn additional undisclosed compensation, rather than because of the quality of the investment," Morgenthau said.
Many times, the investments took a dive in the weeks or months following the fraudulent trades. The district attorney said because of the heavy loses, some elderly investors "were forced back into the work force to survive."
Sorbara's attorney, Michael Bachner, said the brokerage company had done nothing wrong. He called the indictment "legally and factually defective," and predicted his client would be vindicated.
There was no immediate response to a message left for Markowitz's lawyer.
If convicted, all the defendants face up to 25 years in prison.
