Penny-Stock Profiteer Turns Witness
By his own admission, Jordan Belfort may have set the standard for greed and sleaze in the world of boiler-room brokerages.
Belfort estimates he cheated investors out of as much as $200 million in the early 1990s. He spent his $55-million profit on a 166-foot yacht--which sank--a $175,000 sports car, prostitutes, gambling sprees and drugs for his gaggle of Gen-X pitchmen.
Belfort and his partners, he said, “lied to customers. We lied to government when being investigated. We lied to each other.”
Now the one-time professional liar has been recast in a new role: trustworthy government witness.
Belfort, 38, pleaded guilty last fall to committing securities fraud and laundering money as chairman of Stratton Oakmont Inc., a defunct Long Island firm prosecutors called “the most infamous boiler-room brokerage firm in recent memory.” He resurfaced last week in Brooklyn federal court as those same prosecutors’ star witness in the trial of Stratton’s former accountant.
By agreeing to forfeit $13 million and testify against the accountant, Dennis Gaito, and other stock-fraud defendants, Belfort is hoping to avoid a 30-year prison term. In exchange, prosecutors will back his bid for a lighter sentence.
The prosecution is relying on Belfort, who is out on bail, to prove allegations that Gaito tried to help Stratton dodge Securities and Exchange Commission investigators by cooking the firm’s books and channeling illicit proceeds into a bogus holding company and overseas bank accounts.
Accountant Maligned but So Is Witness
The testimony is supported by documents and audiotapes--secretly recorded by Belfort in an FBI sting--showing Gaito “knowingly and intentionally . . . laundered Stratton’s millions,” Assistant U.S. Atty. Daniel Alonso said at the opening of a trial expected to last a month.
Gaito’s attorney, Ronald Fischetti, warned jurors that the government was asking them to take the word of someone who “had so much money and conned so many people that it was something that you would probably not believe if you read it in a book.”
Fischetti painted Belfort as a wife-beating, drug-addicted swindler. The witness, he claimed, once tried to corrupt former Republican Sen. Alfonse D’Amato of New York with a sweetheart stock deal.
Fischetti alleged Belfort even buried $10 million in his own backyard.
Belfort--fearing he would go down with his yacht in a 1996 storm in the Mediterranean--made an emergency call to his partner to tell him where to dig up the cash, Fischetti said. A helicopter rescued Belfort before the ship went down.
Once on the witness stand, Belfort denied the buried treasure tale.
The natty, boyish Belfort told jurors his first job out of college was as a meat salesman. Looking to make more money, he and a broker friend founded Stratton in Lake Success, N.Y., in 1989.
As the stock market took off, so did Stratton’s “pump and dump” operation.
The boiler room--a name given to a room where phone solicitors may employ deceptive, high-pressure sales tactics--made millions by peddling penny stocks at inflated prices, Belfort said. After artificially driving the value up, he would sell his own shares before prices crashed.
The brokerage also made a killing in kickbacks through initial public offerings, or IPOs.
Belfort also testified he made D’Amato, a “casual friend,” $37,000 overnight in 1993 on an IPO after the senator dismissed his warning that the firm was under investigation by the SEC. Belfort claimed he later lied to the Senate Ethics Committee to protect the senator.
A D’Amato spokeswoman called the testimony “absolute nonsense.”
Belfort also admitted under questioning by the prosecutor, Alonso, that he and his brokers often snorted cocaine and hired prostitutes.
“During the day, or after work?” Alonso asked.
“Both,” Belfort replied.
Belfort testified that his coke and Quaalude binges continued after he was banned from the brokerage industry. Once while high in 1996, he pushed his wife down a flight of stairs in a fight over their small daughter, he said.
“I was losing my family,” he said. “I was destroying my life. I was going to either die or go into drug rehab.”
Belfort said he’s been clean ever since. But in another incident last year, he violated bail by taking a helicopter to Atlantic City, N.J., with $50,000 and gambling all night. A judge threw him back in jail for five months.
“I was beyond stupid,” he said.
