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The secret life of Dennis Lavine is The secret life of Dennis Lavine is about to become an open secret. No, not about to become an open secret. No, not about to become an open secret. No, not what he did that sent him to Lewisburg what he did that sent him to Lewisburg what he did that sent him to Lewisburg Penitentiary for insider trading on Wall Penitentiary for insider trading on Wall Penitentiary for insider trading on Wall Street. Everybody knows about that. He's Street. Everybody knows about that. He's Street. Everybody knows about that. He's even written a book about it. But what even written a book about it. But what even written a book about it. But what he's been up to since he got out of he's been up to since he got out of he's been up to since he got out of Lewisburg. this man who told us he'd Lewisburg. this man who told us he'd Lewisburg. this man who told us he'd never do anything illegal or unethical never do anything illegal or unethical never do anything illegal or unethical again. First, let's go back to Lavine's again. First, let's go back to Lavine's again. First, let's go back to Lavine's high living days when he was making high living days when he was making high living days when he was making millions illegally sharing inside millions illegally sharing inside millions illegally sharing inside information and trading on it. Sometimes information and trading on it. Sometimes information and trading on it. Sometimes using a private phone line in his office using a private phone line in his office using a private phone line in his office at Drexel Burnham Lombair. at Drexel Burnham Lombair. at Drexel Burnham Lombair. >> What was it like when that phone rang? >> What was it like when that phone rang? >> What was it like when that phone rang? It was like a cash register going off. It was like a cash register going off. It was like a cash register going off. >> Like the day in 1985, Lavine traded on >> Like the day in 1985, Lavine traded on >> Like the day in 1985, Lavine traded on inside information in Nabiscoco stock. inside information in Nabiscoco stock. inside information in Nabiscoco stock. No sooner did the stock open that my No sooner did the stock open that my No sooner did the stock open that my phone lit up like a Christmas tree and phone lit up like a Christmas tree and phone lit up like a Christmas tree and each of the people involved called to each of the people involved called to each of the people involved called to say, "How do we do?" It was this say, "How do we do?" It was this say, "How do we do?" It was this incredible feeling of incredible feeling of incredible feeling of invulnerability of a rush that in invulnerability of a rush that in invulnerability of a rush that in pushing a button and making two phone pushing a button and making two phone pushing a button and making two phone calls, I made close to $3 million.

calls, I made close to $3 million. calls, I made close to $3 million. And that's what drove it. That was the And that's what drove it. That was the And that's what drove it. That was the insanity of it all. It wasn't that hard. insanity of it all. It wasn't that hard. insanity of it all. It wasn't that hard. It was so easy that in just 5 years, It was so easy that in just 5 years, It was so easy that in just 5 years, Lavine stashed away $12.6 million in a Lavine stashed away $12.6 million in a Lavine stashed away $12.6 million in a secret Bahamian bank account. But that secret Bahamian bank account. But that secret Bahamian bank account. But that wasn't enough. [snorts] wasn't enough. [snorts] wasn't enough. [snorts] >> You get bolder and bolder and bolder and >> You get bolder and bolder and bolder and >> You get bolder and bolder and bolder and it gets easier and you make more money it gets easier and you make more money it gets easier and you make more money and more money and it feeds upon itself. and more money and it feeds upon itself. and more money and it feeds upon itself. And looking back, looking back, I And looking back, looking back, I And looking back, looking back, I realized that that I was sick, that it realized that that I was sick, that it realized that that I was sick, that it became an addiction, that I lived for became an addiction, that I lived for became an addiction, that I lived for the high of making those trades, of the high of making those trades, of the high of making those trades, of doing the next deal, making the bigger doing the next deal, making the bigger doing the next deal, making the bigger deal. deal. deal. >> Sometimes when you would come home, did >> Sometimes when you would come home, did >> Sometimes when you would come home, did you ever look at your wife and say, "I'm you ever look at your wife and say, "I'm you ever look at your wife and say, "I'm risking all of this?" risking all of this?" risking all of this?" >> I didn't think I was, Ed. Foolishly, I >> I didn't think I was, Ed. Foolishly, I >> I didn't think I was, Ed. Foolishly, I thought I could outsmart the system, thought I could outsmart the system, thought I could outsmart the system, but I was wrong. but I was wrong. but I was wrong. I never thought I'd get caught. I never thought I'd get caught. I never thought I'd get caught. I never thought I'd get caught.

I never thought I'd get caught. I never thought I'd get caught. >> You're pushing. >> You're pushing. >> You're pushing. >> MR. LAVINE, ANY COMMENT? >> MR. LAVINE, ANY COMMENT? >> MR. LAVINE, ANY COMMENT? >> But on May 12th, 1986, he did get >> But on May 12th, 1986, he did get >> But on May 12th, 1986, he did get caught. caught. caught. >> Mr. >> Mr. >> Mr. Lavine pleaded guilty to securities Lavine pleaded guilty to securities Lavine pleaded guilty to securities fraud, tax evasion, and perjury. And he fraud, tax evasion, and perjury. And he fraud, tax evasion, and perjury. And he cooperated with the government. He cooperated with the government. He cooperated with the government. He turned in the members of his rank and turned in the members of his rank and turned in the members of his rank and arbitrage Ivan Boowki. Lavine served 15 arbitrage Ivan Boowki. Lavine served 15 arbitrage Ivan Boowki. Lavine served 15 months at the federal penitentiary in months at the federal penitentiary in months at the federal penitentiary in Lewisburg, Pennsylvania and was released Lewisburg, Pennsylvania and was released Lewisburg, Pennsylvania and was released in 1988. in 1988. in 1988. >> He says he's turned his life around. >> He says he's turned his life around. >> He says he's turned his life around. >> Lavine now runs his own financial >> Lavine now runs his own financial >> Lavine now runs his own financial consulting firm. consulting firm. consulting firm. >> Look forward to seeing you, too. >> Look forward to seeing you, too. >> Look forward to seeing you, too. >> And lectures students around the country >> And lectures students around the country >> And lectures students around the country on the lessons he's learned from his on the lessons he's learned from his on the lessons he's learned from his mistakes. mistakes. mistakes. >> I think I have a higher standard. I >> I think I have a higher standard. I >> I think I have a higher standard. I think I think one of the standards that think I think one of the standards that think I think one of the standards that we should all have is whenever whenever we should all have is whenever whenever we should all have is whenever whenever we're about to do something, step back we're about to do something, step back we're about to do something, step back and ask yourself, is this something I'd and ask yourself, is this something I'd and ask yourself, is this something I'd like to read about on the cover of the like to read about on the cover of the like to read about on the cover of the Wall Street Journal tomorrow? Wall Street Journal tomorrow? Wall Street Journal tomorrow? If the answer is yes, then you're If the answer is yes, then you're If the answer is yes, then you're probably doing something right. If the probably doing something right. If the probably doing something right. If the answer is no, answer is no, answer is no, then don't do it.

then don't do it. then don't do it. >> Do you think that you would ever do >> Do you think that you would ever do >> Do you think that you would ever do anything anything anything clearly illegal again? Not only wouldn't clearly illegal again? Not only wouldn't clearly illegal again? Not only wouldn't I do something clearly illegal, I I do something clearly illegal, I I do something clearly illegal, I wouldn't even get close. wouldn't even get close. wouldn't even get close. Once burned, Ed, you don't go near the Once burned, Ed, you don't go near the Once burned, Ed, you don't go near the fire. I've learned a lesson. fire. I've learned a lesson. fire. I've learned a lesson. >> What about something that's >> What about something that's >> What about something that's unethical? >> Would you draw the line there? >> Would you draw the line there? >> Yes. >> Yes. >> Yes. >> Don't tell Randy Yokum and Tom Breel, >> Don't tell Randy Yokum and Tom Breel, >> Don't tell Randy Yokum and Tom Breel, two small businessmen, that Lavine two small businessmen, that Lavine two small businessmen, that Lavine hasn't done anything unethical. They hasn't done anything unethical. They hasn't done anything unethical. They hired him as their financial adviser hired him as their financial adviser hired him as their financial adviser about a year and a half after Lavine got about a year and a half after Lavine got about a year and a half after Lavine got out of prison. They wanted to develop out of prison. They wanted to develop out of prison. They wanted to develop this oceanfront property at Laguna this oceanfront property at Laguna this oceanfront property at Laguna Niguel in California. They paid Lavine Niguel in California. They paid Lavine Niguel in California. They paid Lavine $10,000 in upfront fees. In return, he $10,000 in upfront fees. In return, he $10,000 in upfront fees. In return, he was to help them find financing to build was to help them find financing to build was to help them find financing to build luxury homes from which they all luxury homes from which they all luxury homes from which they all expected to share in a profit of $14 expected to share in a profit of $14 expected to share in a profit of $14 million. Part of Lavine's job was to million. Part of Lavine's job was to million. Part of Lavine's job was to check out the legitimacy of the people check out the legitimacy of the people check out the legitimacy of the people and companies he recommended, that's and companies he recommended, that's and companies he recommended, that's called due diligence, and make sure they called due diligence, and make sure they called due diligence, and make sure they could do the deal.

could do the deal. could do the deal. So, Lavine took Yokum and Brecttell to So, Lavine took Yokum and Brecttell to So, Lavine took Yokum and Brecttell to Panama where he introduced them to two Panama where he introduced them to two Panama where he introduced them to two companies, Morgan Gundy and Pang Global. companies, Morgan Gundy and Pang Global. companies, Morgan Gundy and Pang Global. Pang Global agreed to lend them $32 Pang Global agreed to lend them $32 Pang Global agreed to lend them $32 million as long as Yokum and Bretell million as long as Yokum and Bretell million as long as Yokum and Bretell paid upfront fees of about 150,000. paid upfront fees of about 150,000. paid upfront fees of about 150,000. Yokam and Bretell paid the money after Yokam and Bretell paid the money after Yokam and Bretell paid the money after Lavine told them he'd pulled off a great Lavine told them he'd pulled off a great Lavine told them he'd pulled off a great deal. deal. deal. >> He worked miracles out there. He danced. >> He worked miracles out there. He danced. >> He worked miracles out there. He danced. He was a miracle worker. He was a miracle worker. He was a miracle worker. >> He danced. >> He danced. >> He danced. >> Yeah. And he jumps up and down and says, >> Yeah. And he jumps up and down and says, >> Yeah. And he jumps up and down and says, "This is great, guys. You don't know how "This is great, guys. You don't know how "This is great, guys. You don't know how your lives have changed." your lives have changed." your lives have changed." >> Dennis says this. >> Dennis says this. >> Dennis says this. >> Dennis says, and I mean, you know, it >> Dennis says, and I mean, you know, it >> Dennis says, and I mean, you know, it sent, you know, goosebumps up and down sent, you know, goosebumps up and down sent, you know, goosebumps up and down my spine, you know, and it felt good. my spine, you know, and it felt good. my spine, you know, and it felt good. You know, I thought great. You know, I thought great. You know, I thought great. >> What made you think that these were >> What made you think that these were >> What made you think that these were substantial companies? that these were substantial companies? that these were substantial companies? that these were companies that would do funding. companies that would do funding. companies that would do funding. >> I had a client that verified >> I had a client that verified >> I had a client that verified unequivocally that somebody else unequivocally that somebody else unequivocally that somebody else received funding as a result of that received funding as a result of that received funding as a result of that operation. operation. operation. >> And you did no investigation beyond >> And you did no investigation beyond >> And you did no investigation beyond that? that? that? >> No, I didn't. >> No, I didn't. >> No, I didn't. >> Are you aware that Pan Global and Morgan >> Are you aware that Pan Global and Morgan >> Are you aware that Pan Global and Morgan Gundy, the two companies that you Gundy, the two companies that you Gundy, the two companies that you recommended, have never sold any stock recommended, have never sold any stock recommended, have never sold any stock in Panama to anybody?

in Panama to anybody? in Panama to anybody? >> Based on the information I had, they had >> Based on the information I had, they had >> Based on the information I had, they had done deals in the past. Do you know that done deals in the past. Do you know that done deals in the past. Do you know that they're both under investigation by the they're both under investigation by the they're both under investigation by the FBI? FBI? FBI? >> I have no specific knowledge of an >> I have no specific knowledge of an >> I have no specific knowledge of an investigation. investigation. investigation. >> Our investigation showed many companies >> Our investigation showed many companies >> Our investigation showed many companies paid upfront fees to Pan Global. We paid upfront fees to Pan Global. We paid upfront fees to Pan Global. We found none that got any money in return. found none that got any money in return. found none that got any money in return. We also found that the US embassy in We also found that the US embassy in We also found that the US embassy in Panama and the Commerce Department Panama and the Commerce Department Panama and the Commerce Department warned businesses to stay away from Pang warned businesses to stay away from Pang warned businesses to stay away from Pang Global. Not surprisingly, the Pang Global. Not surprisingly, the Pang Global. Not surprisingly, the Pang Global deal fell through on a Global deal fell through on a Global deal fell through on a technicality, but Lavine came up with technicality, but Lavine came up with technicality, but Lavine came up with another lender. this time out of another lender. this time out of another lender. this time out of Florida. And this time it would be Florida. And this time it would be Florida. And this time it would be costly. $25,000 to Lavine for the costly. $25,000 to Lavine for the costly. $25,000 to Lavine for the introduction and another $300,000 introduction and another $300,000 introduction and another $300,000 upfront to the lender to do the $23 upfront to the lender to do the $23 upfront to the lender to do the $23 million deal. After losing about million deal. After losing about million deal. After losing about $150,000 $150,000 $150,000 in Panama, Yokam and Bretell didn't have in Panama, Yokam and Bretell didn't have in Panama, Yokam and Bretell didn't have the money. So Lavine introduced them to the money. So Lavine introduced them to the money. So Lavine introduced them to Bob Amira, a Las Vegas businessman who Bob Amira, a Las Vegas businessman who Bob Amira, a Las Vegas businessman who Lavine said could find a venture Lavine said could find a venture Lavine said could find a venture partner, someone who could come up with partner, someone who could come up with partner, someone who could come up with the upfront fees in exchange for a piece the upfront fees in exchange for a piece the upfront fees in exchange for a piece of the deal. How does Dennis Lavine of the deal. How does Dennis Lavine of the deal. How does Dennis Lavine characterize me?

characterize me? characterize me? >> Just an associate, somebody that he knew >> Just an associate, somebody that he knew >> Just an associate, somebody that he knew during his days at Drexel. during his days at Drexel. during his days at Drexel. >> Did you check him out before >> Did you check him out before >> Did you check him out before recommending him? recommending him? recommending him? >> No. >> No. >> No. >> No. But isn't that part of what you do? >> No. But isn't that part of what you do? >> No. But isn't that part of what you do? Check out companies. Check out indiv. Check out companies. Check out indiv. Check out companies. Check out indiv. All I did was make an introduction. All I did was make an introduction. All I did was make an introduction. >> Were you aware that that he's a >> Were you aware that that he's a >> Were you aware that that he's a convicted thief? convicted thief? convicted thief? >> No. >> No. >> No. >> That he has ties to the New York Mafia? >> That he has ties to the New York Mafia? >> That he has ties to the New York Mafia? >> I had no idea. >> I had no idea. >> I had no idea. >> No idea. We checked him out and found >> No idea. We checked him out and found >> No idea. We checked him out and found that Amamira had been convicted of theft that Amamira had been convicted of theft that Amamira had been convicted of theft for his part in a credit scheme that for his part in a credit scheme that for his part in a credit scheme that netted over $700,000 from two Atlantic netted over $700,000 from two Atlantic netted over $700,000 from two Atlantic City casinos. State investigators said City casinos. State investigators said City casinos. State investigators said the scheme was engineered by New York the scheme was engineered by New York the scheme was engineered by New York mobsters. mobsters. mobsters. >> So, you didn't check him out. You didn't >> So, you didn't check him out. You didn't >> So, you didn't check him out. You didn't do due diligence as far as he was do due diligence as far as he was do due diligence as far as he was concerned. concerned. concerned. >> He contacted me >> He contacted me >> He contacted me uh indicated that he has capabilities in uh indicated that he has capabilities in uh indicated that he has capabilities in lending loans. He could do real estate lending loans. He could do real estate lending loans. He could do real estate transactions. That's what his his transactions. That's what his his transactions. That's what his his expertise is. And I thought perhaps expertise is. And I thought perhaps expertise is. And I thought perhaps because he he had contacts I don't have because he he had contacts I don't have because he he had contacts I don't have or capabilities I don't have, he could or capabilities I don't have, he could or capabilities I don't have, he could help Tom and Randy.

help Tom and Randy. help Tom and Randy. >> But he couldn't. And eventually Lavine >> But he couldn't. And eventually Lavine >> But he couldn't. And eventually Lavine came up with yet another possibility. came up with yet another possibility. came up with yet another possibility. Jim Msaro Lavine said could help them Jim Msaro Lavine said could help them Jim Msaro Lavine said could help them with the Florida lender. with the Florida lender. with the Florida lender. >> Characterized him as as a friend that uh >> Characterized him as as a friend that uh >> Characterized him as as a friend that uh he's done business with before from his he's done business with before from his he's done business with before from his his days at Drexel. his days at Drexel. his days at Drexel. >> How did you know Jim Msaro? >> How did you know Jim Msaro? >> How did you know Jim Msaro? >> I knew Jim from the time I was at uh >> I knew Jim from the time I was at uh >> I knew Jim from the time I was at uh Lewisburg. Lewisburg. Lewisburg. >> Lewisburg Penitentiary where Misaro and >> Lewisburg Penitentiary where Misaro and >> Lewisburg Penitentiary where Misaro and Lavine spent almost nine months Lavine spent almost nine months Lavine spent almost nine months together. together. together. >> Did you tell them that? >> Did you tell them that? >> Did you tell them that? >> I I'm not sure. I'm not sure they knew >> I I'm not sure. I'm not sure they knew >> I I'm not sure. I'm not sure they knew that. Did you tell them that he had been that. Did you tell them that he had been that. Did you tell them that he had been convicted of business fraud? >> I don't I don't recall telling them >> I don't I don't recall telling them that. Now, that. Now, that. Now, >> should you have told them that? >> should you have told them that? >> should you have told them that? >> Why? >> Why? >> Why? >> You're their financial advisor. >> You're their financial advisor. >> You're their financial advisor. I mean, if somebody's going to do I mean, if somebody's going to do I mean, if somebody's going to do business with somebody who's been business with somebody who's been business with somebody who's been convicted, I think they have the right convicted, I think they have the right convicted, I think they have the right to know. Then they can make their own to know. Then they can make their own to know. Then they can make their own decision. I'm not saying that that decision. I'm not saying that that decision. I'm not saying that that >> Well, I would be a hypocrite. They >> Well, I would be a hypocrite. They >> Well, I would be a hypocrite. They clearly knew what my background was. I clearly knew what my background was. I clearly knew what my background was. I don't hide it. Um, you know, I mean, I'm don't hide it. Um, you know, I mean, I'm don't hide it. Um, you know, I mean, I'm very upfront about it, Ed.

very upfront about it, Ed. very upfront about it, Ed. >> Right. >> Right. >> Right. >> U, >> U, >> U, >> but did they have the right to know >> but did they have the right to know >> but did they have the right to know about Jim Msaw's background that he had about Jim Msaw's background that he had about Jim Msaw's background that he had been convicted of business fraud and been convicted of business fraud and been convicted of business fraud and that the two of you met in the Lewisburg that the two of you met in the Lewisburg that the two of you met in the Lewisburg penitentiary? >> Perhaps. >> Perhaps. Why didn't you? >> I wanted to help Tom and Randy. That's >> I wanted to help Tom and Randy. That's what this is all about. what this is all about. what this is all about. Eventually, Randy and Tom met the second Eventually, Randy and Tom met the second Eventually, Randy and Tom met the second lender who Lavine said could fund the lender who Lavine said could fund the lender who Lavine said could fund the deal. It was a Florida company, deal. It was a Florida company, deal. It was a Florida company, Ernscliffe Trust, headed by Robert Ernscliffe Trust, headed by Robert Ernscliffe Trust, headed by Robert Wilson, shown here at a business Wilson, shown here at a business Wilson, shown here at a business function in American Samoa. function in American Samoa. function in American Samoa. >> How did Dennis Lavine describe Robert >> How did Dennis Lavine describe Robert >> How did Dennis Lavine describe Robert Wilson? supposedly a big wheel in the Wilson? supposedly a big wheel in the Wilson? supposedly a big wheel in the lending lending business and at the at lending lending business and at the at lending lending business and at the at the high level the high level the high level >> and Lee Liebarger >> and Lee Liebarger >> and Lee Liebarger >> he was a heavy hitter >> he was a heavy hitter >> he was a heavy hitter >> and you're relying on Dennis Lavine's >> and you're relying on Dennis Lavine's >> and you're relying on Dennis Lavine's judgment here at judgment here at judgment here at >> during this past year and a half two >> during this past year and a half two >> during this past year and a half two years we have relied totally on Dennis years we have relied totally on Dennis years we have relied totally on Dennis Lavine's judgment Lavine's judgment Lavine's judgment >> if he brings you to a guy the guy's okay >> if he brings you to a guy the guy's okay >> if he brings you to a guy the guy's okay >> that's right >> that's right >> that's right >> what specifically did you tell him about >> what specifically did you tell him about >> what specifically did you tell him about those two guys those two guys those two guys >> I said it's a new operation they're >> I said it's a new operation they're >> I said it's a new operation they're expanding expanding expanding They've developed a novel concept.

They've developed a novel concept. They've developed a novel concept. They've provided very good references They've provided very good references They've provided very good references that have been checked out. >> Checked out by by other clients. >> Checked out by by other clients. >> Had you checked him out? >> Had you checked him out? >> Had you checked him out? >> Yes. >> Yes. >> Yes. >> You checked him out. So then you were >> You checked him out. So then you were >> You checked him out. So then you were aware that that Liebar is a convicted aware that that Liebar is a convicted aware that that Liebar is a convicted thief? thief? thief? >> No, we didn't. I didn't do a background >> No, we didn't. I didn't do a background >> No, we didn't. I didn't do a background check on that. No. But we did a check on that. No. But we did a check on that. No. But we did a background check on Liebarger and found background check on Liebarger and found background check on Liebarger and found not only this mugsh shot, but that he not only this mugsh shot, but that he not only this mugsh shot, but that he had defrauded at least four people of had defrauded at least four people of had defrauded at least four people of over $120,000 in a business scam in the over $120,000 in a business scam in the over $120,000 in a business scam in the early8s. Last December, he was arrested early8s. Last December, he was arrested early8s. Last December, he was arrested on charges of running an upfront fee on charges of running an upfront fee on charges of running an upfront fee scam out of New Orleans. You were aware scam out of New Orleans. You were aware scam out of New Orleans. You were aware that Wilson had outstanding legal that Wilson had outstanding legal that Wilson had outstanding legal judgments against him? I judgments against him? I judgments against him? I >> had no idea of that. >> had no idea of that. >> had no idea of that. >> You were aware that he'd made promises >> You were aware that he'd made promises >> You were aware that he'd made promises to other businessmen to fund deals that to other businessmen to fund deals that to other businessmen to fund deals that he'd never funded? he'd never funded? he'd never funded? >> At the time, I was not aware of that >> At the time, I was not aware of that >> At the time, I was not aware of that either. either. either. But you checked them out. But you checked them out. But you checked them out. >> They were checked out. They had lawyers. >> They were checked out. They had lawyers. >> They were checked out. They had lawyers. They had people representing them. They They had people representing them. They They had people representing them. They had bank references.

had bank references. had bank references. >> Based on the information that we have, >> Based on the information that we have, >> Based on the information that we have, our background check. Earns Cliff has our background check. Earns Cliff has our background check. Earns Cliff has taken in at least $2.5 million in taken in at least $2.5 million in taken in at least $2.5 million in advance fees, but never paid any client advance fees, but never paid any client advance fees, but never paid any client any money. It has no assets. Its banking any money. It has no assets. Its banking any money. It has no assets. Its banking and credit references are phony. It's and credit references are phony. It's and credit references are phony. It's not licensed to operate in Florida or not licensed to operate in Florida or not licensed to operate in Florida or anywhere else in the United States. is anywhere else in the United States. is anywhere else in the United States. is not registered as a dealer of securities not registered as a dealer of securities not registered as a dealer of securities in Florida. That's what our background in Florida. That's what our background in Florida. That's what our background check shows. check shows. check shows. Your background check shows something Your background check shows something Your background check shows something different. different. different. >> When we discussed this situation with >> When we discussed this situation with >> When we discussed this situation with the clients, we told them it was new. the clients, we told them it was new. the clients, we told them it was new. They had just opened up an office. It They had just opened up an office. It They had just opened up an office. It was a I mean, there was we never ever was a I mean, there was we never ever was a I mean, there was we never ever told a client anything that wasn't true. told a client anything that wasn't true. told a client anything that wasn't true. In March of 91, the Florida In March of 91, the Florida In March of 91, the Florida Controllers's Office shut down Erns Controllers's Office shut down Erns Controllers's Office shut down Erns Cliff Trust, alleging the company was Cliff Trust, alleging the company was Cliff Trust, alleging the company was billing consumers out of upfront fees billing consumers out of upfront fees billing consumers out of upfront fees for loans that were never made. Bretell for loans that were never made. Bretell for loans that were never made. Bretell and Yokum received no money from Robert and Yokum received no money from Robert and Yokum received no money from Robert Wilson. What does all of this look like?

What? What? >> You know, I I I hate to say it, Dennis, >> You know, I I I hate to say it, Dennis, >> You know, I I I hate to say it, Dennis, but it just doesn't on the surface look but it just doesn't on the surface look but it just doesn't on the surface look good. good. good. >> Then let's look beyond the surface. >> Then let's look beyond the surface. >> Then let's look beyond the surface. Let's get right down to the specifics Let's get right down to the specifics Let's get right down to the specifics and the documents. and the documents. and the documents. >> But each time I get down to the >> But each time I get down to the >> But each time I get down to the specifics of the people involved, I specifics of the people involved, I specifics of the people involved, I don't see due diligence on your part. I I'm trying to give you the benefit of I I'm trying to give you the benefit of the doubt, right? to tell me how you the doubt, right? to tell me how you the doubt, right? to tell me how you came up with these people who are a came up with these people who are a came up with these people who are a group of convicted conmen thieves. group of convicted conmen thieves. group of convicted conmen thieves. >> The story as you tell it based on the >> The story as you tell it based on the >> The story as you tell it based on the documents that you've reviewed is documents that you've reviewed is documents that you've reviewed is imbalanced. Again, I'll go back to what imbalanced. Again, I'll go back to what imbalanced. Again, I'll go back to what I said. I'd like an opportunity to I said. I'd like an opportunity to I said. I'd like an opportunity to provide you with my information, my provide you with my information, my provide you with my information, my background, [snorts] and I think you'll background, [snorts] and I think you'll background, [snorts] and I think you'll see a totally different version. see a totally different version. see a totally different version. >> Lavine gave us more than 800 pages of >> Lavine gave us more than 800 pages of >> Lavine gave us more than 800 pages of documents, and after looking at each of documents, and after looking at each of documents, and after looking at each of them, we didn't find a different them, we didn't find a different them, we didn't find a different version. We found no evidence that version. We found no evidence that version. We found no evidence that Lavine did due diligence, that he Lavine did due diligence, that he Lavine did due diligence, that he checked out the people or the companies checked out the people or the companies checked out the people or the companies he introduced to Brecktail and Yokum. We he introduced to Brecktail and Yokum. We he introduced to Brecktail and Yokum. We also found nothing in all of this that also found nothing in all of this that also found nothing in all of this that showed Pan Global or Ernscliffe Trust showed Pan Global or Ernscliffe Trust showed Pan Global or Ernscliffe Trust had ever funded a deal. We did uncover had ever funded a deal. We did uncover had ever funded a deal. We did uncover this on one document. Lavine had whited this on one document. Lavine had whited this on one document. Lavine had whited out the name of a company he had out the name of a company he had out the name of a company he had advised. We scratched off the white out advised. We scratched off the white out advised. We scratched off the white out and called that company. Its president and called that company. Its president and called that company. Its president told us for upfront fees of $20,000 to told us for upfront fees of $20,000 to told us for upfront fees of $20,000 to Lavine, he too had been introduced to Lavine, he too had been introduced to Lavine, he too had been introduced to Panang Global and Ernscliffe. But unlike Panang Global and Ernscliffe. But unlike Panang Global and Ernscliffe. But unlike Bretel and Yokum who say they're out Bretel and Yokum who say they're out Bretel and Yokum who say they're out over $200,000, over $200,000, over $200,000, he pulled out of the deals because of

he pulled out of the deals because of he pulled out of the deals because of suspicions about the companies. He's suspicions about the companies. He's suspicions about the companies. He's still waiting to get his money back from still waiting to get his money back from still waiting to get his money back from Lavine. What would you say to people who Lavine. What would you say to people who Lavine. What would you say to people who would accuse you of being a con man? would accuse you of being a con man? would accuse you of being a con man? >> It's absolutely false. I never conned >> It's absolutely false. I never conned >> It's absolutely false. I never conned anybody in my life. know what I anybody in my life. know what I anybody in my life. know what I >> I mean some people have described you as >> I mean some people have described you as >> I mean some people have described you as a consumate a consumate a consumate combat that even to the point that combat that even to the point that combat that even to the point that sometimes you con yourself. sometimes you con yourself. sometimes you con yourself. What would you say to them? People are What would you say to them? People are What would you say to them? People are entitled to their opinions, but it's not entitled to their opinions, but it's not entitled to their opinions, but it's not true. I have to live with myself. I true. I have to live with myself. I true. I have to live with myself. I don't think I've done anything wrong. Because traders in the brokerage Because traders in the brokerage industry commit to multi-million dollar industry commit to multi-million dollar industry commit to multi-million dollar deals on phones, through faxes, and over deals on phones, through faxes, and over deals on phones, through faxes, and over computer terminals, almost always with computer terminals, almost always with computer terminals, almost always with people they never see. One of the people they never see. One of the people they never see. One of the cardinal rules of the business is know cardinal rules of the business is know cardinal rules of the business is know your customer. Well, Daniel Taibbo is your customer. Well, Daniel Taibbo is your customer. Well, Daniel Taibbo is one customer they didn't know. And yet one customer they didn't know. And yet one customer they didn't know. And yet more than a dozen of Wall Street's more than a dozen of Wall Street's more than a dozen of Wall Street's largest brokerage houses did deals with largest brokerage houses did deals with largest brokerage houses did deals with him. Taibbo is now accused of running him. Taibbo is now accused of running him. Taibbo is now accused of running possibly the largest freewriting scam in possibly the largest freewriting scam in possibly the largest freewriting scam in the history of the treasuries market.

the history of the treasuries market. the history of the treasuries market. >> 85 million up 4 plus you buy 12 plus you >> 85 million up 4 plus you buy 12 plus you >> 85 million up 4 plus you buy 12 plus you sell. sell. sell. >> Why would you do 35 million on the >> Why would you do 35 million on the >> Why would you do 35 million on the >> language, the phones, the chaos, the >> language, the phones, the chaos, the >> language, the phones, the chaos, the speed, the flashing computer screens, speed, the flashing computer screens, speed, the flashing computer screens, the waves of information all make the the waves of information all make the the waves of information all make the world of bond traders inaccessible. Only world of bond traders inaccessible. Only world of bond traders inaccessible. Only those who are members of the club those who are members of the club those who are members of the club understand the cryptic language and understand the cryptic language and understand the cryptic language and practices of the business. practices of the business. practices of the business. >> I'm a seller right now. I'm long. Don't >> I'm a seller right now. I'm long. Don't >> I'm a seller right now. I'm long. Don't hate 29 bit. I'll buy them at 29. That's hate 29 bit. I'll buy them at 29. That's hate 29 bit. I'll buy them at 29. That's fine. According to the Securities and fine. According to the Securities and fine. According to the Securities and Exchange Commission, Daniel Taibbo used Exchange Commission, Daniel Taibbo used Exchange Commission, Daniel Taibbo used his understanding of bond trading to his understanding of bond trading to his understanding of bond trading to lure about 25 Wall Street firms into lure about 25 Wall Street firms into lure about 25 Wall Street firms into making multi-million dollar deals, making multi-million dollar deals, making multi-million dollar deals, trading a total of 165 million with trading a total of 165 million with trading a total of 165 million with Goldman Sachs and more than 250 million Goldman Sachs and more than 250 million Goldman Sachs and more than 250 million with just three smaller brokerage with just three smaller brokerage with just three smaller brokerage houses. houses. houses. >> I would say conservatively speaking, he >> I would say conservatively speaking, he >> I would say conservatively speaking, he put a billion dollars at risk on the put a billion dollars at risk on the put a billion dollars at risk on the street. street. street. >> A billion >> A billion >> A billion >> with a B. That's correct. Tom Piro and >> with a B. That's correct. Tom Piro and >> with a B. That's correct. Tom Piro and McKay White of Compliance Data Center McKay White of Compliance Data Center McKay White of Compliance Data Center are in essence financial gum shoes. When are in essence financial gum shoes. When are in essence financial gum shoes. When brokerage firms call them, they track brokerage firms call them, they track brokerage firms call them, they track the con artists and deadbeats working the con artists and deadbeats working the con artists and deadbeats working Wall Street.

Wall Street. Wall Street. >> How much could he have made from that? >> How much could he have made from that? >> How much could he have made from that? Well, Well, Well, >> sky's is the limit, I suppose, if things >> sky's is the limit, I suppose, if things >> sky's is the limit, I suppose, if things went his way. went his way. went his way. >> 17's coming into cover. >> 17's coming into cover. >> 17's coming into cover. >> Somehow, Taiba would get the direct >> Somehow, Taiba would get the direct >> Somehow, Taiba would get the direct number of the trading desk and just call number of the trading desk and just call number of the trading desk and just call the brokerage firms claiming to be a big the brokerage firms claiming to be a big the brokerage firms claiming to be a big player. Robert Mcdana who works in the player. Robert Mcdana who works in the player. Robert Mcdana who works in the corporate credit department of Meil corporate credit department of Meil corporate credit department of Meil Lynch was one of the first people to Lynch was one of the first people to Lynch was one of the first people to catch Taibbo and report him. He said catch Taibbo and report him. He said catch Taibbo and report him. He said that the first time Taibbo called he that the first time Taibbo called he that the first time Taibbo called he wanted to buy a huge quantity of wanted to buy a huge quantity of wanted to buy a huge quantity of treasury. treasury. treasury. >> We're talking about 500 million. >> We're talking about 500 million. >> We're talking about 500 million. >> So he wanted to do a deal involving $500 >> So he wanted to do a deal involving $500 >> So he wanted to do a deal involving $500 million. million. million. >> Yes.$500 million. >> Yes.$500 million. >> Yes.$500 million. >> How did Taibbo get what they call on >> How did Taibbo get what they call on >> How did Taibbo get what they call on Wall Street a free ride? Trading Wall Street a free ride? Trading Wall Street a free ride? Trading securities without paying for them. He securities without paying for them. He securities without paying for them. He was hoping that the market would go in was hoping that the market would go in was hoping that the market would go in his favor for one day and he would close his favor for one day and he would close his favor for one day and he would close out the trade by the end of the day and out the trade by the end of the day and out the trade by the end of the day and just have the proceeds. just have the proceeds. just have the proceeds. >> So the free ride is basically you're >> So the free ride is basically you're >> So the free ride is basically you're taking a gamble that it's going to go taking a gamble that it's going to go taking a gamble that it's going to go up. You don't put any money up for these up. You don't put any money up for these up. You don't put any money up for these millions of dollars of securities.

millions of dollars of securities. millions of dollars of securities. >> If you close the transaction out by the >> If you close the transaction out by the >> If you close the transaction out by the end of the day, you do not have to put end of the day, you do not have to put end of the day, you do not have to put up any money. up any money. up any money. >> And if it goes up by the end of the day >> And if it goes up by the end of the day >> And if it goes up by the end of the day or the next day, you can then turn or the next day, you can then turn or the next day, you can then turn around and sell it and you keep the around and sell it and you keep the around and sell it and you keep the difference. difference. difference. >> You keep the difference. That's correct. >> You keep the difference. That's correct. >> You keep the difference. That's correct. >> The government estimates that in just 17 >> The government estimates that in just 17 >> The government estimates that in just 17 months, Taibbo made about $200,000. months, Taibbo made about $200,000. months, Taibbo made about $200,000. But when his trades went bad, a number But when his trades went bad, a number But when his trades went bad, a number of the brokerage houses lost hundreds of of the brokerage houses lost hundreds of of the brokerage houses lost hundreds of thousands of dollars. thousands of dollars. thousands of dollars. >> See, that's the flying ointment as far >> See, that's the flying ointment as far >> See, that's the flying ointment as far as the brokerage houses are concerned is as the brokerage houses are concerned is as the brokerage houses are concerned is if things didn't go his way, they were if things didn't go his way, they were if things didn't go his way, they were stuck with losses. stuck with losses. stuck with losses. >> I mean, it has to be pretty embarrassing >> I mean, it has to be pretty embarrassing >> I mean, it has to be pretty embarrassing for them to have been taken by Tao. for them to have been taken by Tao. for them to have been taken by Tao. >> Sure. I'm sure they are embarrassed, but >> Sure. I'm sure they are embarrassed, but >> Sure. I'm sure they are embarrassed, but more than embarrassed, I would suspect more than embarrassed, I would suspect more than embarrassed, I would suspect that they might be pretty pissed off. that they might be pretty pissed off. that they might be pretty pissed off. >> You're talking about a gentleman who >> You're talking about a gentleman who >> You're talking about a gentleman who spoke a very good Wall Street. He spoke spoke a very good Wall Street. He spoke spoke a very good Wall Street. He spoke a perfect Wall Street. Okay. a perfect Wall Street. Okay. a perfect Wall Street. Okay. >> Willie Daniels is the founder of United >> Willie Daniels is the founder of United >> Willie Daniels is the founder of United Daniels, a small brokerage house. Daniels, a small brokerage house. Daniels, a small brokerage house. >> He was up to date on everything. He knew >> He was up to date on everything. He knew >> He was up to date on everything. He knew exactly what he wanted to do. He exactly what he wanted to do. He exactly what he wanted to do. He described the security he wanted described the security he wanted described the security he wanted perfectly. He described how he wanted perfectly. He described how he wanted perfectly. He described how he wanted his orders perfect. if though I was his orders perfect. if though I was his orders perfect. if though I was doing business with a trader from one of doing business with a trader from one of doing business with a trader from one of the major New York City banks. Okay.

the major New York City banks. Okay. the major New York City banks. Okay. >> Daniels was one of the few traders >> Daniels was one of the few traders >> Daniels was one of the few traders Taibbo was unable to come. Taibbo was unable to come. Taibbo was unable to come. >> How do you figure these people at other >> How do you figure these people at other >> How do you figure these people at other firms did business firms did business firms did business multi-million dollar business with a multi-million dollar business with a multi-million dollar business with a total stranger? total stranger? total stranger? >> It's done every day in our business. >> It's done every day in our business. >> It's done every day in our business. Okay. You get your respect in this Okay. You get your respect in this Okay. You get your respect in this industry based on your numbers, your industry based on your numbers, your industry based on your numbers, your production. Okay. Here's an opportunity production. Okay. Here's an opportunity production. Okay. Here's an opportunity to do this trade. Okay. And I'm going to to do this trade. Okay. And I'm going to to do this trade. Okay. And I'm going to gross X number of dollars which X goes gross X number of dollars which X goes gross X number of dollars which X goes in my pocket. Okay. Uh, the greed was in my pocket. Okay. Uh, the greed was in my pocket. Okay. Uh, the greed was there in terms of the dollar. there in terms of the dollar. there in terms of the dollar. >> Until recently, Daniel Taibbo had had >> Until recently, Daniel Taibbo had had >> Until recently, Daniel Taibbo had had only a brief conversation at his door only a brief conversation at his door only a brief conversation at his door with Eric Pulley of New York Magazine, with Eric Pulley of New York Magazine, with Eric Pulley of New York Magazine, and it looked like we weren't going to and it looked like we weren't going to and it looked like we weren't going to get much further when we stopped by his get much further when we stopped by his get much further when we stopped by his home one Sunday afternoon. But after a home one Sunday afternoon. But after a home one Sunday afternoon. But after a while, Taibbo decided to change into his while, Taibbo decided to change into his while, Taibbo decided to change into his Wall Street garb and talk to us. Wall Street garb and talk to us. Wall Street garb and talk to us. >> For example, I brought you a copy of my >> For example, I brought you a copy of my >> For example, I brought you a copy of my my transaction with Goldman Sachs. Okay. my transaction with Goldman Sachs. Okay. my transaction with Goldman Sachs. Okay. And And And >> Goldman Sachs said you took them for a >> Goldman Sachs said you took them for a >> Goldman Sachs said you took them for a lot of money. lot of money. lot of money. >> No, no. My account statements are here. >> No, no. My account statements are here. >> No, no. My account statements are here. These are all the repo transaction.

These are all the repo transaction. These are all the repo transaction. >> 9 million. >> 9 million. >> 9 million. >> Yes. >> Yes. >> Yes. >> 4,950,000. >> 4,950,000. >> 4,950,000. >> Yes. These are 4 million >> Yes. These are 4 million >> Yes. These are 4 million >> million 9 5 million 3, >> million 9 5 million 3, >> million 9 5 million 3, >> right? >> right? >> right? >> 5,31, >> 5,31, >> 5,31, >> right? You're dealing in big books. >> right? You're dealing in big books. >> right? You're dealing in big books. >> Well, it's a leverage market. I mean, >> Well, it's a leverage market. I mean, >> Well, it's a leverage market. I mean, it's it the whole thing is leverage. it's it the whole thing is leverage. it's it the whole thing is leverage. >> Taibbo explained how he did his deals. >> Taibbo explained how he did his deals. >> Taibbo explained how he did his deals. For example, this repo transaction that For example, this repo transaction that For example, this repo transaction that I I I bought a security. I don't have I I I bought a security. I don't have I I I bought a security. I don't have the money to pay for it and I went to the money to pay for it and I went to the money to pay for it and I went to the repo market and borrow the money to the repo market and borrow the money to the repo market and borrow the money to cover the security. cover the security. cover the security. >> Is that legal that you can buy it? >> Is that legal that you can buy it? >> Is that legal that you can buy it? >> Yes, that is what all of them are doing. >> Yes, that is what all of them are doing. >> Yes, that is what all of them are doing. Look at the affidual statement. Look at the affidual statement. Look at the affidual statement. >> The repo market allows traders to buy >> The repo market allows traders to buy >> The repo market allows traders to buy bonds and then get a loan to pay for bonds and then get a loan to pay for bonds and then get a loan to pay for them using those same bonds as them using those same bonds as them using those same bonds as collateral. Goldman Sachs, Solomon collateral. Goldman Sachs, Solomon collateral. Goldman Sachs, Solomon Brothers, Harry Bob Bank, they all have Brothers, Harry Bob Bank, they all have Brothers, Harry Bob Bank, they all have collateral. collateral. collateral. >> So when you go to borrow this money, >> So when you go to borrow this money, >> So when you go to borrow this money, what do you use for collateral? what do you use for collateral? what do you use for collateral? >> What do you mean by they all have >> What do you mean by they all have >> What do you mean by they all have collateral? I don't understand. collateral? I don't understand. collateral? I don't understand. >> Well, I mean Goldman Sachs has got >> Well, I mean Goldman Sachs has got >> Well, I mean Goldman Sachs has got capital. capital. capital. >> Yes, they they have >> Yes, they they have >> Yes, they they have >> What do you use for capital? What do you >> What do you use for capital? What do you >> What do you use for capital? What do you use to say, okay, you're dealing with use to say, okay, you're dealing with use to say, okay, you're dealing with $10 million here. You have to have $10 million here. You have to have $10 million here. You have to have something to back it up. Suppose the something to back it up. Suppose the something to back it up. Suppose the market goes down and you lose and you market goes down and you lose and you market goes down and you lose and you got to pay the money. What do you use got to pay the money. What do you use got to pay the money. What do you use for collateral? Okay, here you are. You for collateral? Okay, here you are. You for collateral? Okay, here you are. You can see for example, can see for example, can see for example, I borrowed $9 million or whatever it is.

I borrowed $9 million or whatever it is. I borrowed $9 million or whatever it is. And the cost of borrowing that $9 And the cost of borrowing that $9 And the cost of borrowing that $9 million is $799. You have that. million is $799. You have that. million is $799. You have that. >> You can borrow $9 million and it only >> You can borrow $9 million and it only >> You can borrow $9 million and it only cost you $799. cost you $799. cost you $799. >> Yes. On the repo market. >> Yes. On the repo market. >> Yes. On the repo market. >> Tom Piro says Taibbo couldn't have done >> Tom Piro says Taibbo couldn't have done >> Tom Piro says Taibbo couldn't have done that without forging stacks of false that without forging stacks of false that without forging stacks of false financial statements. He was trying to financial statements. He was trying to financial statements. He was trying to give the impression he was worth 25 mil, give the impression he was worth 25 mil, give the impression he was worth 25 mil, 30 mil, whatever the case may be. So, a 30 mil, whatever the case may be. So, a 30 mil, whatever the case may be. So, a firm would say, "Well, he's got the firm would say, "Well, he's got the firm would say, "Well, he's got the money. This is fine. Let's go ahead and money. This is fine. Let's go ahead and money. This is fine. Let's go ahead and do this transaction with him." If he do this transaction with him." If he do this transaction with him." If he said he would he had a possibly a said he would he had a possibly a said he would he had a possibly a Pontiac Lemons in his driveway and Pontiac Lemons in his driveway and Pontiac Lemons in his driveway and $2,000 in Rockfold State Bank, they're $2,000 in Rockfold State Bank, they're $2,000 in Rockfold State Bank, they're not going to do that type of trade with not going to do that type of trade with not going to do that type of trade with him. Simple as that. Too much at risk. him. Simple as that. Too much at risk. him. Simple as that. Too much at risk. >> Where's your office, by the way? >> Where's your office, by the way? >> Where's your office, by the way? [laughter] [laughter] [laughter] >> Uh, I work from my basement, too. Taibbo >> Uh, I work from my basement, too. Taibbo >> Uh, I work from my basement, too. Taibbo took us downstairs to his basement took us downstairs to his basement took us downstairs to his basement office, a dark room with unfinished office, a dark room with unfinished office, a dark room with unfinished walls, and showed us the equipment he walls, and showed us the equipment he walls, and showed us the equipment he used to make his multi-million dollar used to make his multi-million dollar used to make his multi-million dollar deals with the biggest brokerage houses deals with the biggest brokerage houses deals with the biggest brokerage houses in the world. in the world. in the world. >> So So basically with this setup here >> So So basically with this setup here >> So So basically with this setup here >> with with this these two computers, >> with with this these two computers, >> with with this these two computers, you've got another computer back over you've got another computer back over you've got another computer back over here.

here. here. >> This is a connection with the satellite >> This is a connection with the satellite >> This is a connection with the satellite system. system. system. >> Your telephone, the modem. >> Your telephone, the modem. >> Your telephone, the modem. >> What's this? >> What's this? >> What's this? >> It's a typewriter. >> It's a typewriter. >> It's a typewriter. So with this you can be in touch with So with this you can be in touch with So with this you can be in touch with anyone anyone anyone >> in the world >> in the world >> in the world >> in the world. You can get any financial >> in the world. You can get any financial >> in the world. You can get any financial information anywhere in the world. information anywhere in the world. information anywhere in the world. >> Anyone. >> Anyone. >> Anyone. >> But when Taibbo got in touch with people >> But when Taibbo got in touch with people >> But when Taibbo got in touch with people all over the world, he wouldn't always all over the world, he wouldn't always all over the world, he wouldn't always tell them who he really was. Court tell them who he really was. Court tell them who he really was. Court documents say he used many fake names. documents say he used many fake names. documents say he used many fake names. Names like Jack Renfro, Paul Palmer, and Names like Jack Renfro, Paul Palmer, and Names like Jack Renfro, Paul Palmer, and Richard Gant. And that he created a Richard Gant. And that he created a Richard Gant. And that he created a number of fake companies to make his number of fake companies to make his number of fake companies to make his deals. For instance, in February 1992, a deals. For instance, in February 1992, a deals. For instance, in February 1992, a man who said he was Jack Renfro called man who said he was Jack Renfro called man who said he was Jack Renfro called Dean Witter's office in New York, Dean Witter's office in New York, Dean Witter's office in New York, claiming to be a Dean Witter trader from claiming to be a Dean Witter trader from claiming to be a Dean Witter trader from their office in Chvy Chase, Maryland. He their office in Chvy Chase, Maryland. He their office in Chvy Chase, Maryland. He wanted to do a $5 million trade for a wanted to do a $5 million trade for a wanted to do a $5 million trade for a client. client. client. >> He said go to the desk and tell them >> He said go to the desk and tell them >> He said go to the desk and tell them right now that he would take it at 6 56. right now that he would take it at 6 56. right now that he would take it at 6 56. Can you do that for him? Can you do that for him? Can you do that for him? >> He wants to buy 5 million long bonds at >> He wants to buy 5 million long bonds at >> He wants to buy 5 million long bonds at 1026.

1026. 1026. >> Yes, right now. Tell get it. Get it for >> Yes, right now. Tell get it. Get it for >> Yes, right now. Tell get it. Get it for him. him. him. >> Hold on. >> Hold on. >> Hold on. You are done on 5 million long bonds at You are done on 5 million long bonds at You are done on 5 million long bonds at 1026. 1026. 1026. >> After doing the deal, when the trader >> After doing the deal, when the trader >> After doing the deal, when the trader couldn't find any Jack Renfro in the couldn't find any Jack Renfro in the couldn't find any Jack Renfro in the Chvy Chase office, he became suspicious. Chvy Chase office, he became suspicious. Chvy Chase office, he became suspicious. >> How come when I called the Chvy Chase >> How come when I called the Chvy Chase >> How come when I called the Chvy Chase office, they said that there's no one by office, they said that there's no one by office, they said that there's no one by your name in that office? Because I just your name in that office? Because I just your name in that office? Because I just started there. I told you I mean I don't started there. I told you I mean I don't started there. I told you I mean I don't understand the matter because why? I understand the matter because why? I understand the matter because why? I just started there. I'm a newcomer just started there. I'm a newcomer just started there. I'm a newcomer there. So they don't have me in their there. So they don't have me in their there. So they don't have me in their system yet. When Dean Witter refused to system yet. When Dean Witter refused to system yet. When Dean Witter refused to continue trading with Jack Renfro, a Mr. continue trading with Jack Renfro, a Mr. continue trading with Jack Renfro, a Mr. Richard Gant called using a speaker Richard Gant called using a speaker Richard Gant called using a speaker phone. This phone. This phone. This >> Mr. Gant. >> Mr. Gant. >> Mr. Gant. >> Yeah. You You worked with Jack Renfro? >> Yeah. You You worked with Jack Renfro? >> Yeah. You You worked with Jack Renfro? >> He works for me. >> He works for me. >> He works for me. >> He works for you. >> He works for you. >> He works for you. >> Yes. >> Yes. >> Yes. >> Taibbo even succeeded in getting some of >> Taibbo even succeeded in getting some of >> Taibbo even succeeded in getting some of the brokerage firms that caught him to the brokerage firms that caught him to the brokerage firms that caught him to pay him any trading profits he made. He pay him any trading profits he made. He pay him any trading profits he made. He wasn't so lucky with Dean Witter. wasn't so lucky with Dean Witter. wasn't so lucky with Dean Witter. >> What's the problem? This is Bob Ferrari. >> What's the problem? This is Bob Ferrari. >> What's the problem? This is Bob Ferrari. I'm the head of the department. I'm the head of the department. I'm the head of the department. >> Yes. What's there? No problem. I My my >> Yes. What's there? No problem. I My my >> Yes. What's there? No problem. I My my stop bought the security and he told you stop bought the security and he told you stop bought the security and he told you you owe me money.

you owe me money. you owe me money. >> I owe you nothing. >> I owe you nothing. >> I owe you nothing. >> I owe you nothing and I've got you on >> I owe you nothing and I've got you on >> I owe you nothing and I've got you on tape. You misrepresented yourself, pal. tape. You misrepresented yourself, pal. tape. You misrepresented yourself, pal. And if you don't want a major case, you And if you don't want a major case, you And if you don't want a major case, you better get out of here right now. better get out of here right now. better get out of here right now. >> What are you talking about, sir? >> What are you talking about, sir? >> What are you talking about, sir? >> I have spoken with the branch manager. >> I have spoken with the branch manager. >> I have spoken with the branch manager. He does not know Jackfrey. You're not He does not know Jackfrey. You're not He does not know Jackfrey. You're not authorized to execute a trade against authorized to execute a trade against authorized to execute a trade against me. You're out. me. You're out. me. You're out. They alleged that you called They alleged that you called They alleged that you called >> used a number of different voices, >> used a number of different voices, >> used a number of different voices, >> a number of different accents. >> a number of different accents. >> a number of different accents. >> True, not true. >> True, not true. >> True, not true. >> No, I don't I have only one single >> No, I don't I have only one single >> No, I don't I have only one single accent. I I don't know how to I don't accent. I I don't know how to I don't accent. I I don't know how to I don't change my accent. When I call and I want change my accent. When I call and I want change my accent. When I call and I want to do a trade, I would identify who I to do a trade, I would identify who I to do a trade, I would identify who I am. am. am. >> So all of these what they call them >> So all of these what they call them >> So all of these what they call them pseudonyms and aliases, which they say pseudonyms and aliases, which they say pseudonyms and aliases, which they say were used by you. were used by you. were used by you. >> Right. Now, Richard Gant, >> Right. Now, Richard Gant, >> Right. Now, Richard Gant, >> uh, >> uh, >> uh, >> Richard Gan is also a partner in RK Gans >> Richard Gan is also a partner in RK Gans >> Richard Gan is also a partner in RK Gans and Associates. and Associates. and Associates. >> See, what I would like to see, Mr. >> See, what I would like to see, Mr. >> See, what I would like to see, Mr. Taibbo show up in court. Mr. Gant show Taibbo show up in court. Mr. Gant show Taibbo show up in court. Mr. Gant show up in court, shake hands. Surely Gance's up in court, shake hands. Surely Gance's up in court, shake hands. Surely Gance's going to stand by Tibo. But I think the going to stand by Tibo. But I think the going to stand by Tibo. But I think the only way that's going to happen is if only way that's going to happen is if only way that's going to happen is if Taibbo goes in a men's room, puts on a Taibbo goes in a men's room, puts on a Taibbo goes in a men's room, puts on a different suit and tie, and comes out.

different suit and tie, and comes out. different suit and tie, and comes out. >> I can't see. >> I can't see. >> I can't see. >> We had the Dean Witter tape of Gant and >> We had the Dean Witter tape of Gant and >> We had the Dean Witter tape of Gant and Renfro analyzed and compared to our Renfro analyzed and compared to our Renfro analyzed and compared to our interview with Taibbo. The conclusion, interview with Taibbo. The conclusion, interview with Taibbo. The conclusion, all the voices are almost definitely the all the voices are almost definitely the all the voices are almost definitely the same man. After they were analyzed, same man. After they were analyzed, same man. After they were analyzed, Taibbo admitted that he had passed Taibbo admitted that he had passed Taibbo admitted that he had passed himself off as both Richard Gant and himself off as both Richard Gant and himself off as both Richard Gant and Jack Renfro. His explanation, Richard Jack Renfro. His explanation, Richard Jack Renfro. His explanation, Richard Gant had told him to. But if Gant is Gant had told him to. But if Gant is Gant had told him to. But if Gant is Taibbo and Taibbo is Renfro, they Taibbo and Taibbo is Renfro, they Taibbo and Taibbo is Renfro, they weren't the only names used by Taibbo. weren't the only names used by Taibbo. weren't the only names used by Taibbo. Paul Palmer. Paul Palmer. Paul Palmer. >> Paul Palmer is a partner of mine uh that >> Paul Palmer is a partner of mine uh that >> Paul Palmer is a partner of mine uh that uh we joined together to form the the uh we joined together to form the the uh we joined together to form the the JFM government securities. JFM government securities. JFM government securities. >> That's sir Paul Palmer. >> That's sir Paul Palmer. >> That's sir Paul Palmer. >> Well, Paul Palmer, he used to go by the >> Well, Paul Palmer, he used to go by the >> Well, Paul Palmer, he used to go by the name Sir Paul Palmer, but his real name name Sir Paul Palmer, but his real name name Sir Paul Palmer, but his real name is Paul Palmer. is Paul Palmer. is Paul Palmer. >> But he's a he's been knited. That's why >> But he's a he's been knited. That's why >> But he's a he's been knited. That's why they call him Sir. they call him Sir. they call him Sir. >> No, no, he just used the name. >> No, no, he just used the name. >> No, no, he just used the name. >> Is honorific? >> Is honorific? >> Is honorific? >> No, it doesn't have any anything to >> No, it doesn't have any anything to >> No, it doesn't have any anything to >> He just uses it. >> He just uses it. >> He just uses it. >> He just uses it. >> He just uses it. >> He just uses it. >> Uhhuh. Where does he live? >> Uhhuh. Where does he live? >> Uhhuh. Where does he live? >> It's in Africa. We asked Taibbo about >> It's in Africa. We asked Taibbo about >> It's in Africa. We asked Taibbo about one of the companies the SEC says he one of the companies the SEC says he one of the companies the SEC says he created called Stein and Stein.

created called Stein and Stein. created called Stein and Stein. >> Who is Stein? >> Who is Stein? >> Who is Stein? >> There's nobody. You mean >> There's nobody. You mean >> There's nobody. You mean Stein? There's a gentleman that that I Stein? There's a gentleman that that I Stein? There's a gentleman that that I met whose name is Samuel Stein that says met whose name is Samuel Stein that says met whose name is Samuel Stein that says that we could you know join together and that we could you know join together and that we could you know join together and form a um um a firm a partnership. But I form a um um a firm a partnership. But I form a um um a firm a partnership. But I was going to be the managing partner was going to be the managing partner was going to be the managing partner who's going to be running. who's going to be running. who's going to be running. >> So Mr. Stein is your partner? >> So Mr. Stein is your partner? >> So Mr. Stein is your partner? >> Yes. What's his first name? >> Yes. What's his first name? >> Yes. What's his first name? >> Samuel Stein. >> Samuel Stein. >> Samuel Stein. >> Samuel Stein, >> Samuel Stein, >> Samuel Stein, >> right? >> right? >> right? >> He's here in Washington. >> He's here in Washington. >> He's here in Washington. >> No, he's not here in Washington. >> No, he's not here in Washington. >> No, he's not here in Washington. >> Where is he located? >> Where is he located? >> Where is he located? >> Well, they are all back. All of them are >> Well, they are all back. All of them are >> Well, they are all back. All of them are back in Africa right now. back in Africa right now. back in Africa right now. >> So, Mr. Stein's in Africa, >> So, Mr. Stein's in Africa, >> So, Mr. Stein's in Africa, >> right? >> right? >> right? >> So, Stein and Stein, is there another >> So, Stein and Stein, is there another >> So, Stein and Stein, is there another Stein or just the one? Stein or just the one? Stein or just the one? >> Just one, just a name. Although we have >> Just one, just a name. Although we have >> Just one, just a name. Although we have repeatedly asked, Taibbo has been unable repeatedly asked, Taibbo has been unable repeatedly asked, Taibbo has been unable to put us or for that matter the to put us or for that matter the to put us or for that matter the Nigerian Securities and Exchange Nigerian Securities and Exchange Nigerian Securities and Exchange Commission in touch with Sir Paul Commission in touch with Sir Paul Commission in touch with Sir Paul Palmer, either of the two steines or any Palmer, either of the two steines or any Palmer, either of the two steines or any of his alleged business associates or of his alleged business associates or of his alleged business associates or partners either here or in Africa. When partners either here or in Africa. When partners either here or in Africa. When the Nigerian SEC was asked about a few the Nigerian SEC was asked about a few the Nigerian SEC was asked about a few of the companies, they were blunt. The of the companies, they were blunt. The of the companies, they were blunt. The companies don't exist and the names are companies don't exist and the names are companies don't exist and the names are fake.

fake. fake. >> I'm not a crew. I'm just a very >> I'm not a crew. I'm just a very >> I'm not a crew. I'm just a very knowledgeable investor. someone that you knowledgeable investor. someone that you knowledgeable investor. someone that you can call a sophisticated investor that can call a sophisticated investor that can call a sophisticated investor that wants to be part of the part part of the wants to be part of the part part of the wants to be part of the part part of the people investing in the market people investing in the market people investing in the market >> and an honest businessman >> and an honest businessman >> and an honest businessman >> and an honest businessman. No doubt. >> and an honest businessman. No doubt. >> and an honest businessman. No doubt. >> Well, not exactly. No doubt. 4 days >> Well, not exactly. No doubt. 4 days >> Well, not exactly. No doubt. 4 days later, Daniel Taibbo was charged with 17 later, Daniel Taibbo was charged with 17 later, Daniel Taibbo was charged with 17 counts of securities fraud. Right now, counts of securities fraud. Right now, counts of securities fraud. Right now, he's in jail awaiting his day in court. he's in jail awaiting his day in court. he's in jail awaiting his day in court. No doubt. At 16 years of age, Jonathan Leed isn't At 16 years of age, Jonathan Leed isn't old enough to drink, drive, or vote. old enough to drink, drive, or vote. old enough to drink, drive, or vote. Yet, federal authorities say he's plenty Yet, federal authorities say he's plenty Yet, federal authorities say he's plenty smart enough to have engineered a smart enough to have engineered a smart enough to have engineered a sophisticated stock manipulation scheme sophisticated stock manipulation scheme sophisticated stock manipulation scheme that's netted him hundreds of thousands that's netted him hundreds of thousands that's netted him hundreds of thousands of dollars in illegal profits. As we of dollars in illegal profits. As we of dollars in illegal profits. As we first reported last October, Leed made first reported last October, Leed made first reported last October, Leed made headlines around the world for being the headlines around the world for being the headlines around the world for being the youngest person and the first minor ever youngest person and the first minor ever youngest person and the first minor ever accused of securities fraud. Officials accused of securities fraud. Officials accused of securities fraud. Officials say his strategy was to buy a stock, say his strategy was to buy a stock, say his strategy was to buy a stock, hype it relentlessly on the internet, hype it relentlessly on the internet, hype it relentlessly on the internet, and then sell it when the price soared.

and then sell it when the price soared. and then sell it when the price soared. >> You don't look like a stock swindler. >> You don't look like a stock swindler. >> You don't look like a stock swindler. >> That's good. Are you? No. Until last >> That's good. Are you? No. Until last >> That's good. Are you? No. Until last fall, Jonathan Leed seemed to be a fall, Jonathan Leed seemed to be a fall, Jonathan Leed seemed to be a fairly typical high school junior in fairly typical high school junior in fairly typical high school junior in Cedar Grove, New Jersey. He's an avid Cedar Grove, New Jersey. He's an avid Cedar Grove, New Jersey. He's an avid fan of the New York Mets and fan of the New York Mets and fan of the New York Mets and professional wrestling. And if anything professional wrestling. And if anything professional wrestling. And if anything set him apart, it was his fascination set him apart, it was his fascination set him apart, it was his fascination with the stock market. with the stock market. with the stock market. >> So, this is your office? >> So, this is your office? >> So, this is your office? >> Yes. >> Yes. >> Yes. >> Command Central, of course. >> Command Central, of course. >> Command Central, of course. >> With his parents' permission, he's been >> With his parents' permission, he's been >> With his parents' permission, he's been playing the stock market from his playing the stock market from his playing the stock market from his bedroom computer since he was 13 years bedroom computer since he was 13 years bedroom computer since he was 13 years old. and as the pile of crumpled 20s on old. and as the pile of crumpled 20s on old. and as the pile of crumpled 20s on his dresser might indicate, doing quite his dresser might indicate, doing quite his dresser might indicate, doing quite well. If he told his buddies he had made well. If he told his buddies he had made well. If he told his buddies he had made close to a million dollars, they close to a million dollars, they close to a million dollars, they probably wouldn't have believed it. probably wouldn't have believed it. probably wouldn't have believed it. >> Well, some teenagers my age would be >> Well, some teenagers my age would be >> Well, some teenagers my age would be trading baseball cards. I see bigger trading baseball cards. I see bigger trading baseball cards. I see bigger potential in this. potential in this. potential in this. >> What was your first investment? >> What was your first investment? >> What was your first investment? >> America Online. >> America Online. >> America Online. >> What'd you buy it at? >> What'd you buy it at? >> What'd you buy it at? >> $25. >> $25. >> $25. >> And what did you sell it at? >> And what did you sell it at? >> And what did you sell it at? >> $30. >> $30. >> $30. Not bad.

Not bad. Not bad. For someone who has just turned 16, For someone who has just turned 16, For someone who has just turned 16, Jonathan Leed has a relatively long Jonathan Leed has a relatively long Jonathan Leed has a relatively long track record for picking stocks. Three track record for picking stocks. Three track record for picking stocks. Three years ago, he and a couple of classmates years ago, he and a couple of classmates years ago, he and a couple of classmates took fourth place in a nationwide took fourth place in a nationwide took fourth place in a nationwide contest sponsored by CNBC. contest sponsored by CNBC. contest sponsored by CNBC. >> Jonathan Leed, way to go, guys. >> Jonathan Leed, way to go, guys. >> Jonathan Leed, way to go, guys. >> On paper, his team turned a hypothetical >> On paper, his team turned a hypothetical >> On paper, his team turned a hypothetical $10,000 into $240,000. $10,000 into $240,000. $10,000 into $240,000. Enough to convince his parents, Connie Enough to convince his parents, Connie Enough to convince his parents, Connie and Greg Leed. He's a supervisor with and Greg Leed. He's a supervisor with and Greg Leed. He's a supervisor with Amtrak. He's an office temp that it was Amtrak. He's an office temp that it was Amtrak. He's an office temp that it was time for their son to stop playing on time for their son to stop playing on time for their son to stop playing on paper and start playing for real. paper and start playing for real. paper and start playing for real. >> How much money did he start with? >> How much money did he start with? >> How much money did he start with? >> He started with a few thousand. He had >> He started with a few thousand. He had >> He started with a few thousand. He had bonds and we had cashed them in. bonds and we had cashed them in. bonds and we had cashed them in. >> Hoping that he might turn it into >> Hoping that he might turn it into >> Hoping that he might turn it into $240,000. $240,000. $240,000. >> We said it could happen. [laughter] >> We said it could happen. [laughter] >> We said it could happen. [laughter] >> It's been before. >> It's been before. >> It's been before. >> And you encouraged him to >> And you encouraged him to >> And you encouraged him to [clears throat] continue to pursue this. [clears throat] continue to pursue this. [clears throat] continue to pursue this. >> Yes. I thought it was a very good thing >> Yes. I thought it was a very good thing >> Yes. I thought it was a very good thing for him to be doing. for him to be doing. for him to be doing. >> Did you ever ask him what his secret >> Did you ever ask him what his secret >> Did you ever ask him what his secret was? was? was? >> No. I didn't want to bring no bad luck. >> No. I didn't want to bring no bad luck. >> No. I didn't want to bring no bad luck. I didn't want to know. I didn't want to know. I didn't want to know. >> Shortly after opening his first online >> Shortly after opening his first online >> Shortly after opening his first online trading account, Jonathan discovered the trading account, Jonathan discovered the trading account, Jonathan discovered the volatile penny stock market where shares volatile penny stock market where shares volatile penny stock market where shares of small companies ranged from a few of small companies ranged from a few of small companies ranged from a few cents to a few dollars.

cents to a few dollars. cents to a few dollars. >> It was a lot more interesting than the >> It was a lot more interesting than the >> It was a lot more interesting than the larger companies. It's a lot more fun. larger companies. It's a lot more fun. larger companies. It's a lot more fun. >> Fun because you're searching for the >> Fun because you're searching for the >> Fun because you're searching for the next hot company, the next Microsoft. next hot company, the next Microsoft. next hot company, the next Microsoft. >> You consider risky. >> You consider risky. >> You consider risky. >> Risky is the way to go. >> Risky is the way to go. >> Risky is the way to go. >> Really? Why? You're not going to get >> Really? Why? You're not going to get >> Really? Why? You're not going to get anywhere without taking risks. anywhere without taking risks. anywhere without taking risks. >> What's the largest amount of money you >> What's the largest amount of money you >> What's the largest amount of money you ever put down on a stock? ever put down on a stock? ever put down on a stock? >> About $200,000. >> About $200,000. >> About $200,000. >> Do you have any idea how much $200,000 >> Do you have any idea how much $200,000 >> Do you have any idea how much $200,000 is? is? is? >> Well, I still use a 99 cent coupon at >> Well, I still use a 99 cent coupon at >> Well, I still use a 99 cent coupon at Burger King. So Burger King. So Burger King. So >> to minimize his risk, Leed says he did >> to minimize his risk, Leed says he did >> to minimize his risk, Leed says he did his own research on stocks, by scouring his own research on stocks, by scouring his own research on stocks, by scouring SEC filings, looking through press SEC filings, looking through press SEC filings, looking through press releases, and by inspecting the releases, and by inspecting the releases, and by inspecting the companies firsthand, like the time he companies firsthand, like the time he companies firsthand, like the time he made his mother drive him to T-C to made his mother drive him to T-C to made his mother drive him to T-C to check out a bagel chain. check out a bagel chain. check out a bagel chain. >> So I'm there, Jonathan, I don't even >> So I'm there, Jonathan, I don't even >> So I'm there, Jonathan, I don't even know how to get to Tene. I'll give you know how to get to Tene. I'll give you know how to get to Tene. I'll give you the directions. I said, all right, I'll the directions. I said, all right, I'll the directions. I said, all right, I'll take you to the bagel store. So we drive take you to the bagel store. So we drive take you to the bagel store. So we drive all the way to T-C. He was all excited. all the way to T-C. He was all excited. all the way to T-C. He was all excited. We He looked at the whole store. We We He looked at the whole store. We We He looked at the whole store. We bought bagels. We went to the park. I bought bagels. We went to the park. I bought bagels. We went to the park. I ate the bagels. And um he bought stock ate the bagels. And um he bought stock ate the bagels. And um he bought stock in the company in the company in the company >> based on that trip.

>> based on that trip. >> based on that trip. >> Yes. >> Yes. >> Yes. >> Right. And you know he wanted to see the >> Right. And you know he wanted to see the >> Right. And you know he wanted to see the companies he studied that they really companies he studied that they really companies he studied that they really existed and that yeah how well they're existed and that yeah how well they're existed and that yeah how well they're doing. doing. doing. >> Jonathan says he did well in bagels >> Jonathan says he did well in bagels >> Jonathan says he did well in bagels buying in at 3 cents a share and cashing buying in at 3 cents a share and cashing buying in at 3 cents a share and cashing out at 3 12 cents. All the while honing out at 3 12 cents. All the while honing out at 3 12 cents. All the while honing what he thought was a brilliant what he thought was a brilliant what he thought was a brilliant investment strategy. basically find investment strategy. basically find investment strategy. basically find companies that are extremely undervalued companies that are extremely undervalued companies that are extremely undervalued that would be worth a lot more if that would be worth a lot more if that would be worth a lot more if everybody knew about it. everybody knew about it. everybody knew about it. >> So you bought the stock and then >> So you bought the stock and then >> So you bought the stock and then proceeded to try and tell people about proceeded to try and tell people about proceeded to try and tell people about it. it. it. >> Yes. >> Yes. >> Yes. >> How did you do that? >> How did you do that? >> How did you do that? >> By sending out messages on chat rooms on >> By sending out messages on chat rooms on >> By sending out messages on chat rooms on the internet. the internet. the internet. >> Hundreds of messages actually under a >> Hundreds of messages actually under a >> Hundreds of messages actually under a variety of names. His online variety of names. His online variety of names. His online recommendations accompanied by recommendations accompanied by recommendations accompanied by legitimate financial data were always legitimate financial data were always legitimate financial data were always quite bullish. He called one of his quite bullish. He called one of his quite bullish. He called one of his holdings the most undervalued stock in holdings the most undervalued stock in holdings the most undervalued stock in history. Another was going to be the history. Another was going to be the history. Another was going to be the next stock to gain 2,000%. next stock to gain 2,000%. next stock to gain 2,000%. >> You were trying to make the price of the >> You were trying to make the price of the >> You were trying to make the price of the stock go up. stock go up. stock go up. >> Yes. >> Yes. >> Yes. >> The stock you owned. >> The stock you owned. >> The stock you owned. >> Yes. >> Yes. >> Yes. >> And then you sold.

>> And then you sold. >> And then you sold. >> Yes. >> Yes. >> Yes. >> Like his investment in a small company >> Like his investment in a small company >> Like his investment in a small company called Firetector. After buying a large called Firetector. After buying a large called Firetector. After buying a large block of shares at $245 a piece, he went block of shares at $245 a piece, he went block of shares at $245 a piece, he went into cyerspace and plastered messages into cyerspace and plastered messages into cyerspace and plastered messages like this one, predicting that the stock like this one, predicting that the stock like this one, predicting that the stock would be at $20 very soon. And just as would be at $20 very soon. And just as would be at $20 very soon. And just as soon as other investors jumped in, Leed soon as other investors jumped in, Leed soon as other investors jumped in, Leed cashed out, in this [music] case, at cashed out, in this [music] case, at cashed out, in this [music] case, at $3.38 a share, pocketing a profit of $3.38 a share, pocketing a profit of $3.38 a share, pocketing a profit of $19,000. $19,000. $19,000. >> And you didn't see anything wrong with >> And you didn't see anything wrong with >> And you didn't see anything wrong with that? that? that? >> No. >> No. >> No. >> Never occurred to you. >> Never occurred to you. >> Never occurred to you. >> No. Unfortunately for Jonathan, federal >> No. Unfortunately for Jonathan, federal >> No. Unfortunately for Jonathan, federal investigators didn't see it that way. As investigators didn't see it that way. As investigators didn't see it that way. As it turns out, the Securities and it turns out, the Securities and it turns out, the Securities and Exchange Commission had been monitoring Exchange Commission had been monitoring Exchange Commission had been monitoring his trade since 1998 and earlier this his trade since 1998 and earlier this his trade since 1998 and earlier this year finally decided to accuse him of year finally decided to accuse him of year finally decided to accuse him of securities fraud. securities fraud. securities fraud. >> This was a calculated >> This was a calculated >> This was a calculated ongoing effort to defraud innocent ongoing effort to defraud innocent ongoing effort to defraud innocent investors. investors. investors. >> Arthur Lev is the chairman of the >> Arthur Lev is the chairman of the >> Arthur Lev is the chairman of the Securities and Exchange Commission. He Securities and Exchange Commission. He Securities and Exchange Commission. He says Jonathan Leed seems to have says Jonathan Leed seems to have says Jonathan Leed seems to have mastered an age-old Wall Street swindle mastered an age-old Wall Street swindle mastered an age-old Wall Street swindle called the pump and dump.

called the pump and dump. called the pump and dump. >> What exactly is a pump and dump? >> What exactly is a pump and dump? >> What exactly is a pump and dump? >> A pump and dump is really uh buy, lie, >> A pump and dump is really uh buy, lie, >> A pump and dump is really uh buy, lie, and sell high. and sell high. and sell high. >> Do you think he knew he was breaking the >> Do you think he knew he was breaking the >> Do you think he knew he was breaking the law? law? law? >> There's no question about it. He used >> There's no question about it. He used >> There's no question about it. He used fictitious names. He made predictions fictitious names. He made predictions fictitious names. He made predictions that were without any foundation. The that were without any foundation. The that were without any foundation. The SEC says Leed's clear intent was to SEC says Leed's clear intent was to SEC says Leed's clear intent was to drive the price of his stock up with drive the price of his stock up with drive the price of his stock up with hype, not even he believed, and then to hype, not even he believed, and then to hype, not even he believed, and then to sell out as quickly as possible. sell out as quickly as possible. sell out as quickly as possible. >> Master Leed had no intention of keeping >> Master Leed had no intention of keeping >> Master Leed had no intention of keeping his position. He knew when he made that his position. He knew when he made that his position. He knew when he made that statement that the stock was likely to statement that the stock was likely to statement that the stock was likely to go up and he would immediately sell. The go up and he would immediately sell. The go up and he would immediately sell. The purpose of his making that purpose of his making that purpose of his making that recommendation was not to help investors recommendation was not to help investors recommendation was not to help investors who were looking at an internet bulletin who were looking at an internet bulletin who were looking at an internet bulletin board, but rather to line his own board, but rather to line his own board, but rather to line his own pockets. pockets. pockets. >> You know, the federal government thinks >> You know, the federal government thinks >> You know, the federal government thinks that you were manipulating stocks. that you were manipulating stocks. that you were manipulating stocks. >> Mhm. >> Mhm. >> Mhm. >> Were you? >> Were you? >> Were you? >> Yes. >> Yes. >> Yes. >> You were. You admit to that. >> You were. You admit to that. >> You were. You admit to that. >> Yes. But I wasn't doing anything wrong.

>> Yes. But I wasn't doing anything wrong. >> Yes. But I wasn't doing anything wrong. >> You weren't doing anything. You were >> You weren't doing anything. You were >> You weren't doing anything. You were manipulating stocks, but you weren't manipulating stocks, but you weren't manipulating stocks, but you weren't doing anything wrong. No. doing anything wrong. No. doing anything wrong. No. Can you explain that to me? Can you explain that to me? Can you explain that to me? >> I wasn't posting any kind of false >> I wasn't posting any kind of false >> I wasn't posting any kind of false information. I didn't make up any facts information. I didn't make up any facts information. I didn't make up any facts or do anything like that. or do anything like that. or do anything like that. >> Leed disagrees that the messages he sent >> Leed disagrees that the messages he sent >> Leed disagrees that the messages he sent out were nothing more than bogus chat out were nothing more than bogus chat out were nothing more than bogus chat room hype. He says his recommendations room hype. He says his recommendations room hype. He says his recommendations were always based on accurate were always based on accurate were always based on accurate information and sound financial information and sound financial information and sound financial analysis. His attorney, Kevin Marino, analysis. His attorney, Kevin Marino, analysis. His attorney, Kevin Marino, says the only things Jonathan may be says the only things Jonathan may be says the only things Jonathan may be guilty of are not fully understanding guilty of are not fully understanding guilty of are not fully understanding the finer points of security law and the finer points of security law and the finer points of security law and perhaps a little overenthusiasm. perhaps a little overenthusiasm. perhaps a little overenthusiasm. >> There are certainly are are ways one >> There are certainly are are ways one >> There are certainly are are ways one could look at this and say, "Gee, some could look at this and say, "Gee, some could look at this and say, "Gee, some of this is misleading." To the extent he of this is misleading." To the extent he of this is misleading." To the extent he says this is the greatest stock in the says this is the greatest stock in the says this is the greatest stock in the history of the world, in much the same history of the world, in much the same history of the world, in much the same way as you might be misled if you way as you might be misled if you way as you might be misled if you thought that the car that you bought was thought that the car that you bought was thought that the car that you bought was really the ultimate driving machine or really the ultimate driving machine or really the ultimate driving machine or if you went to the circus and thought it if you went to the circus and thought it if you went to the circus and thought it was really going to be the greatest show was really going to be the greatest show was really going to be the greatest show on earth. Did your client manipulate the on earth. Did your client manipulate the on earth. Did your client manipulate the price of these stocks? price of these stocks? price of these stocks? >> There was some manipulation involved in >> There was some manipulation involved in >> There was some manipulation involved in the price of the stock, but I don't the price of the stock, but I don't the price of the stock, but I don't think he committed a crime. And I don't think he committed a crime. And I don't think he committed a crime. And I don't think as you look at his conduct that think as you look at his conduct that think as you look at his conduct that you could draw a principal distinction you could draw a principal distinction you could draw a principal distinction between what he did and what is done between what he did and what is done between what he did and what is done every single day of the week on Wall every single day of the week on Wall every single day of the week on Wall Street. That is, he touted various Street. That is, he touted various Street. That is, he touted various stocks and he sold them after the prices stocks and he sold them after the prices stocks and he sold them after the prices went up. The distinction according to went up. The distinction according to went up. The distinction according to the SEC is that the Wall Street analyst the SEC is that the Wall Street analyst the SEC is that the Wall Street analyst Jonathan Leed watches on TV are not Jonathan Leed watches on TV are not Jonathan Leed watches on TV are not supposed to profit personally from their supposed to profit personally from their supposed to profit personally from their own predictions. But even the highly

own predictions. But even the highly own predictions. But even the highly regarded financial publication Barons regarded financial publication Barons regarded financial publication Barons seem to believe that Master Leed adopted seem to believe that Master Leed adopted seem to believe that Master Leed adopted standard brokerage house procedure and standard brokerage house procedure and standard brokerage house procedure and put out wildly bullish buy put out wildly bullish buy put out wildly bullish buy recommendations larded with fancy. What recommendations larded with fancy. What recommendations larded with fancy. What little John seemingly wasn't aware of little John seemingly wasn't aware of little John seemingly wasn't aware of was that only chartered financial was that only chartered financial was that only chartered financial analysts are legally entitled to engage analysts are legally entitled to engage analysts are legally entitled to engage in the practice. in the practice. in the practice. >> To take this lad and to try to make him >> To take this lad and to try to make him >> To take this lad and to try to make him the arch criminal while ignoring conduct the arch criminal while ignoring conduct the arch criminal while ignoring conduct of this very stripe that goes on day in of this very stripe that goes on day in of this very stripe that goes on day in and day out on Wall Street is and day out on Wall Street is and day out on Wall Street is intellectually dishonest. It's cruel and intellectually dishonest. It's cruel and intellectually dishonest. It's cruel and it's improper. it's improper. it's improper. >> Marino says most of his clients postings >> Marino says most of his clients postings >> Marino says most of his clients postings included a disclaimer. Be sure to take included a disclaimer. Be sure to take included a disclaimer. Be sure to take the time to do your research. And Yahoo the time to do your research. And Yahoo the time to do your research. And Yahoo Finance, the internet site where most of Finance, the internet site where most of Finance, the internet site where most of his messages were posted, says it's not his messages were posted, says it's not his messages were posted, says it's not a good idea to trade or make any a good idea to trade or make any a good idea to trade or make any investment decisions based on investment decisions based on investment decisions based on information obtained in a chat room. information obtained in a chat room. information obtained in a chat room. >> Some people have made the argument, >> Some people have made the argument, >> Some people have made the argument, look, if anybody who goes in and invests look, if anybody who goes in and invests look, if anybody who goes in and invests money based on what they read off a money based on what they read off a money based on what they read off a bulletin board or in a chat room bulletin board or in a chat room bulletin board or in a chat room deserves to lose the money.

deserves to lose the money. deserves to lose the money. >> Yeah. >> Yeah. >> Yeah. >> That it's like buying a lottery ticket. >> That it's like buying a lottery ticket. >> That it's like buying a lottery ticket. I don't share that that feeling. I think I don't share that that feeling. I think I don't share that that feeling. I think investors must be skeptical about what investors must be skeptical about what investors must be skeptical about what they see in chat rooms. But in this they see in chat rooms. But in this they see in chat rooms. But in this instance, two to 300 postings on instance, two to 300 postings on instance, two to 300 postings on individual securities were made. And individual securities were made. And individual securities were made. And that represents, in my view, a wholesale that represents, in my view, a wholesale that represents, in my view, a wholesale effort at deceiving many investors. effort at deceiving many investors. effort at deceiving many investors. >> We talked to the chairman of the >> We talked to the chairman of the >> We talked to the chairman of the Securities and Exchange Commission the Securities and Exchange Commission the Securities and Exchange Commission the other day. He's paying a lot of other day. He's paying a lot of other day. He's paying a lot of attention to you. He seems convinced attention to you. He seems convinced attention to you. He seems convinced that you knew exactly what you were that you knew exactly what you were that you knew exactly what you were doing and that you ignored the law and doing and that you ignored the law and doing and that you ignored the law and cheated innocent investors. cheated innocent investors. cheated innocent investors. >> Well, I am not aware of one investor >> Well, I am not aware of one investor >> Well, I am not aware of one investor that exists that I cheated, and I don't that exists that I cheated, and I don't that exists that I cheated, and I don't think that the SEC is aware of one think that the SEC is aware of one think that the SEC is aware of one investor that exists that I cheated. investor that exists that I cheated. investor that exists that I cheated. >> The SEC acknowledged that it didn't >> The SEC acknowledged that it didn't >> The SEC acknowledged that it didn't receive any complaints from investors receive any complaints from investors receive any complaints from investors who felt they'd been cheated by Jonathan who felt they'd been cheated by Jonathan who felt they'd been cheated by Jonathan Leette until after the case became Leette until after the case became Leette until after the case became public. Since then, the SEC says it's public. Since then, the SEC says it's public. Since then, the SEC says it's received about two dozen complaints.

received about two dozen complaints. received about two dozen complaints. Rather than go to court over the Rather than go to court over the Rather than go to court over the allegation that he's a crook, Jonathan allegation that he's a crook, Jonathan allegation that he's a crook, Jonathan Leed negotiated a settlement with the Leed negotiated a settlement with the Leed negotiated a settlement with the SEC. He agreed to turn over $285,000 SEC. He agreed to turn over $285,000 SEC. He agreed to turn over $285,000 that he earned from 11 trades without that he earned from 11 trades without that he earned from 11 trades without acknowledging that he did anything acknowledging that he did anything acknowledging that he did anything wrong. His lawyer called it a business wrong. His lawyer called it a business wrong. His lawyer called it a business decision. And given that Leette made in decision. And given that Leette made in decision. And given that Leette made in the neighborhood of $800,000, the neighborhood of $800,000, the neighborhood of $800,000, seems like a pretty good decision. What seems like a pretty good decision. What seems like a pretty good decision. What we looked for were those cases of clear we looked for were those cases of clear we looked for were those cases of clear violations. In those instances where we violations. In those instances where we violations. In those instances where we could not or did not establish that, we could not or did not establish that, we could not or did not establish that, we gave him the benefit of the doubt gave him the benefit of the doubt gave him the benefit of the doubt >> and the benefit of $500,000. >> and the benefit of $500,000. >> and the benefit of $500,000. >> Yes. >> Yes. >> Yes. >> So he gets gets to keep that money. >> So he gets gets to keep that money. >> So he gets gets to keep that money. >> Yes. >> Yes. >> Yes. >> So he did all right. >> So he did all right. >> So he did all right. >> He made a great deal of money. Did he do >> He made a great deal of money. Did he do >> He made a great deal of money. Did he do all right? I don't think so. If he were all right? I don't think so. If he were all right? I don't think so. If he were my son or grandson, I wouldn't think he my son or grandson, I wouldn't think he my son or grandson, I wouldn't think he did all right. did all right. did all right. >> What are your feelings about your son >> What are your feelings about your son >> What are your feelings about your son now? now? now? >> Oh, I'm more proud of him now than ever. >> Oh, I'm more proud of him now than ever. >> Oh, I'm more proud of him now than ever. >> Why? >> Why? >> Why? >> Because he's a smart boy and um he's >> Because he's a smart boy and um he's >> Because he's a smart boy and um he's done a good job.

done a good job. done a good job. >> You're giving back $280,000. >> You're giving back $280,000. >> You're giving back $280,000. >> Does not make me happy. >> Does not make me happy. >> Does not make me happy. >> You'd like to keep it. >> You'd like to keep it. >> You'd like to keep it. >> He earned it. He did a lot of work. He >> He earned it. He did a lot of work. He >> He earned it. He did a lot of work. He didn't uh sit behind a garage smoking didn't uh sit behind a garage smoking didn't uh sit behind a garage smoking pot or stealing wheels off of a car. pot or stealing wheels off of a car. pot or stealing wheels off of a car. >> What with legal fees, taxes, and his SEC >> What with legal fees, taxes, and his SEC >> What with legal fees, taxes, and his SEC settlement, Jonathan Leette isn't quite settlement, Jonathan Leette isn't quite settlement, Jonathan Leette isn't quite as flush with cash as he was before, but as flush with cash as he was before, but as flush with cash as he was before, but he still has a nice nest egg. And his he still has a nice nest egg. And his he still has a nice nest egg. And his family is enjoying some dividends from family is enjoying some dividends from family is enjoying some dividends from his foray into the stock market. his foray into the stock market. his foray into the stock market. >> Jonathan has bought us a car, >> Jonathan has bought us a car, >> Jonathan has bought us a car, >> a Mercedes SUV to be precise. Price tag >> a Mercedes SUV to be precise. Price tag >> a Mercedes SUV to be precise. Price tag $42,000. $42,000. $42,000. You going to be driving to the school You going to be driving to the school You going to be driving to the school anytime soon? anytime soon? anytime soon? >> Well, I just got my permit the other >> Well, I just got my permit the other >> Well, I just got my permit the other day. So, day. So, day. So, >> you just got your learner's permit? >> you just got your learner's permit? >> you just got your learner's permit? >> Yes. >> Yes. >> Yes. >> Did you pass the first time? >> Did you pass the first time? >> Did you pass the first time? >> I I ran over a cone, but um I'm doing >> I I ran over a cone, but um I'm doing >> I I ran over a cone, but um I'm doing pretty well. pretty well. pretty well. >> While he negotiated his settlement with >> While he negotiated his settlement with >> While he negotiated his settlement with the SEC, Leed took a break from the SEC, Leed took a break from the SEC, Leed took a break from investing. He says he has every investing. He says he has every investing. He says he has every intention of returning to the market, intention of returning to the market, intention of returning to the market, though he's promised the SEC he won't though he's promised the SEC he won't though he's promised the SEC he won't hype stocks on the internet. I'm hype stocks on the internet. I'm hype stocks on the internet. I'm starting to take a look at some starting to take a look at some starting to take a look at some companies that interest me right now.

companies that interest me right now. companies that interest me right now. >> So, you're getting ready? >> So, you're getting ready? >> So, you're getting ready? >> Yes. >> Yes. >> Yes. >> You're not going to let this little >> You're not going to let this little >> You're not going to let this little thing with the SEC stand in your way? thing with the SEC stand in your way? thing with the SEC stand in your way? >> Absolutely not. Why would I do that? >> Absolutely not. Why would I do that? >> Absolutely not. Why would I do that? >> A footnote, Arthur Levit stepped down as >> A footnote, Arthur Levit stepped down as >> A footnote, Arthur Levit stepped down as chairman of the SEC in February. As for chairman of the SEC in February. As for chairman of the SEC in February. As for Master Leed, after biting his time for Master Leed, after biting his time for Master Leed, after biting his time for several months, he returned to the stock several months, he returned to the stock several months, he returned to the stock market in early June, investing a few market in early June, investing a few market in early June, investing a few thousand dollars in a small video game thousand dollars in a small video game thousand dollars in a small video game manufacturer. Leed told us he'd been manufacturer. Leed told us he'd been manufacturer. Leed told us he'd been doing so well on paper with theoretical doing so well on paper with theoretical doing so well on paper with theoretical investments that he just had to start investments that he just had to start investments that he just had to start trading again for real. It's been two and a half months since It's been two and a half months since Bernard Elm Maidoff was picked up and Bernard Elm Maidoff was picked up and Bernard Elm Maidoff was picked up and charged with what's believed to be the charged with what's believed to be the charged with what's believed to be the largest financial fraud in history. Yet, largest financial fraud in history. Yet, largest financial fraud in history. Yet, we still don't know much more about the we still don't know much more about the we still don't know much more about the alleged $50 billion scam than what Maid alleged $50 billion scam than what Maid alleged $50 billion scam than what Maid Off initially told the FBI agents who Off initially told the FBI agents who Off initially told the FBI agents who arrested him. There are still no arrested him. There are still no arrested him. There are still no indictments as federal prosecutors indictments as federal prosecutors indictments as federal prosecutors continue to unravel the case and to try continue to unravel the case and to try continue to unravel the case and to try and figure out exactly what happened and and figure out exactly what happened and and figure out exactly what happened and who all was involved. But the proof that who all was involved. But the proof that who all was involved. But the proof that it happened can be found in the ruined it happened can be found in the ruined it happened can be found in the ruined lives of thousands of victims. The one lives of thousands of victims. The one lives of thousands of victims. The one person who knows the most and is willing person who knows the most and is willing person who knows the most and is willing to talk is Harry Mara Polus, the man who to talk is Harry Mara Polus, the man who to talk is Harry Mara Polus, the man who figured out Maidolf's scheme before figured out Maidolf's scheme before figured out Maidolf's scheme before anyone else. He sat down with us for his anyone else. He sat down with us for his anyone else. He sat down with us for his only television interview.

only television interview. only television interview. Until a few months ago, Harry Mara was Until a few months ago, Harry Mara was Until a few months ago, Harry Mara was an obscure financial analyst and mildly an obscure financial analyst and mildly an obscure financial analyst and mildly eccentric fraud investigator from Boston eccentric fraud investigator from Boston eccentric fraud investigator from Boston who most people would never notice on who most people would never notice on who most people would never notice on the street. the street. the street. >> My modern Greek hero, how you doing? >> My modern Greek hero, how you doing? >> My modern Greek hero, how you doing? >> But today, he enjoys an almost heroic >> But today, he enjoys an almost heroic >> But today, he enjoys an almost heroic status, pursued by journalists and movie status, pursued by journalists and movie status, pursued by journalists and movie producers and honored by colleagues as producers and honored by colleagues as producers and honored by colleagues as the man who went to the Securities and the man who went to the Securities and the man who went to the Securities and Exchange Commission and blew the whistle Exchange Commission and blew the whistle Exchange Commission and blew the whistle on Bernie Maidoff in his $50 billion on Bernie Maidoff in his $50 billion on Bernie Maidoff in his $50 billion fraud. Thank you. Thank you. Please take your Thank you. Thank you. Please take your seats. seats. seats. >> But he seems uncomfortable with all the >> But he seems uncomfortable with all the >> But he seems uncomfortable with all the attention and knows that he is no hero. attention and knows that he is no hero. attention and knows that he is no hero. >> I stand before you a $50 billion >> I stand before you a $50 billion >> I stand before you a $50 billion failure. failure. failure. >> How many times did you send material to >> How many times did you send material to >> How many times did you send material to the SEC? the SEC? the SEC? >> May 2000, October 2001, >> May 2000, October 2001, >> May 2000, October 2001, October, November, and December 2005. October, November, and December 2005. October, November, and December 2005. Then again June 2007 Then again June 2007 Then again June 2007 and finally April 2008.

and finally April 2008. and finally April 2008. >> So five separate SEC submissions. >> So five separate SEC submissions. >> So five separate SEC submissions. >> And in spite of all of the things that >> And in spite of all of the things that >> And in spite of all of the things that you did, it still ended up in disaster. you did, it still ended up in disaster. you did, it still ended up in disaster. >> There's nothing to be proud about in >> There's nothing to be proud about in >> There's nothing to be proud about in this case. I feel horrible about the this case. I feel horrible about the this case. I feel horrible about the result. It's been a total disaster for result. It's been a total disaster for result. It's been a total disaster for the victims. the victims. the victims. >> It began a decade ago when Marco Polus >> It began a decade ago when Marco Polus >> It began a decade ago when Marco Polus was working for a Boston investment was working for a Boston investment was working for a Boston investment firm. His boss told him that Bernard firm. His boss told him that Bernard firm. His boss told him that Bernard Maid off, a former chairman of the Maid off, a former chairman of the Maid off, a former chairman of the NASDAQ stock exchange, was running a NASDAQ stock exchange, was running a NASDAQ stock exchange, was running a huge unregistered hedge fund that was huge unregistered hedge fund that was huge unregistered hedge fund that was producing incredible returns. He wanted producing incredible returns. He wanted producing incredible returns. He wanted Harry to reverse engineer its trading Harry to reverse engineer its trading Harry to reverse engineer its trading strategy and revenue streams so that the strategy and revenue streams so that the strategy and revenue streams so that the firm could duplicate Boff's results. firm could duplicate Boff's results. firm could duplicate Boff's results. >> He had the patina of being a respected >> He had the patina of being a respected >> He had the patina of being a respected citizen, one of the most successful citizen, one of the most successful citizen, one of the most successful businessmen in New York, and certainly businessmen in New York, and certainly businessmen in New York, and certainly one of the most powerful men on Wall one of the most powerful men on Wall one of the most powerful men on Wall Street. You would never suspect him of Street. You would never suspect him of Street. You would never suspect him of fraud unless you knew the math. fraud unless you knew the math. fraud unless you knew the math. >> So, I mean, you're like a math guy, >> So, I mean, you're like a math guy, >> So, I mean, you're like a math guy, right? right? right? >> I've taken all the calculus courses from >> I've taken all the calculus courses from >> I've taken all the calculus courses from integral calculus to differential integral calculus to differential integral calculus to differential calculus as well as linear algebra and calculus as well as linear algebra and calculus as well as linear algebra and statistics, both normal and non-normal.

statistics, both normal and non-normal. statistics, both normal and non-normal. >> How long did it take you to figure out >> How long did it take you to figure out >> How long did it take you to figure out that there was something wrong? that there was something wrong? that there was something wrong? >> It took me 5 minutes to know that it was >> It took me 5 minutes to know that it was >> It took me 5 minutes to know that it was a fraud. It took me another almost four a fraud. It took me another almost four a fraud. It took me another almost four hours of mathematical modeling to prove hours of mathematical modeling to prove hours of mathematical modeling to prove that it was a fraud. What were the that it was a fraud. What were the that it was a fraud. What were the things that caught your attention? things that caught your attention? things that caught your attention? >> It was the performance line. As we know >> It was the performance line. As we know >> It was the performance line. As we know that markets go up and down and his only that markets go up and down and his only that markets go up and down and his only went up. He had very few down months. went up. He had very few down months. went up. He had very few down months. Only 4% of the months were down months. Only 4% of the months were down months. Only 4% of the months were down months. And that would be equivalent to a And that would be equivalent to a And that would be equivalent to a baseball player in the major leagues baseball player in the major leagues baseball player in the major leagues batting 960 for a year. Clearly batting 960 for a year. Clearly batting 960 for a year. Clearly impossible. You would suspect cheating impossible. You would suspect cheating impossible. You would suspect cheating immediately. immediately. immediately. >> Maybe he was just good. >> Maybe he was just good. >> Maybe he was just good. >> No one's that good. >> No one's that good. >> No one's that good. >> Harry said there were only two plausible >> Harry said there were only two plausible >> Harry said there were only two plausible explanations. Either Maid Off was using explanations. Either Maid Off was using explanations. Either Maid Off was using insider information to rack up huge insider information to rack up huge insider information to rack up huge profits or he was running a giant Ponzi profits or he was running a giant Ponzi profits or he was running a giant Ponzi scheme. scheme. scheme. >> So either way, he was doing something >> So either way, he was doing something >> So either way, he was doing something illegal. illegal. illegal. >> Either way, I knew he was going to go to >> Either way, I knew he was going to go to >> Either way, I knew he was going to go to prison. prison. prison. >> In May of 2000, Marco Polus took his >> In May of 2000, Marco Polus took his >> In May of 2000, Marco Polus took his suspicions about Bernie Maid off to the suspicions about Bernie Maid off to the suspicions about Bernie Maid off to the Boston office of the Securities and Boston office of the Securities and Boston office of the Securities and Exchange Commission.

Exchange Commission. Exchange Commission. >> Did you have any financial motive? >> Did you have any financial motive? >> Did you have any financial motive? >> Yes. He was a competitor of mine in 2000 >> Yes. He was a competitor of mine in 2000 >> Yes. He was a competitor of mine in 2000 to 2004 while I was still in the to 2004 while I was still in the to 2004 while I was still in the industry. And when someone's competing industry. And when someone's competing industry. And when someone's competing on your playing field who's a dirty on your playing field who's a dirty on your playing field who's a dirty player, you want him tossed off the player, you want him tossed off the player, you want him tossed off the field. field. field. >> He also thought he might be eligible for >> He also thought he might be eligible for >> He also thought he might be eligible for a sizable reward if the fraud involved a sizable reward if the fraud involved a sizable reward if the fraud involved insider trading, but that turned out not insider trading, but that turned out not insider trading, but that turned out not to be the case. to be the case. to be the case. >> In your first letter to the SEC back in >> In your first letter to the SEC back in >> In your first letter to the SEC back in 200, you're a little tentative. You say, 200, you're a little tentative. You say, 200, you're a little tentative. You say, "Look, I have no smoking gun." "Look, I have no smoking gun." "Look, I have no smoking gun." >> In 2000, it was more theoretical. In >> In 2000, it was more theoretical. In >> In 2000, it was more theoretical. In 2001, it was a little bit more real. By 2001, it was a little bit more real. By 2001, it was a little bit more real. By 2005, I had 29 red flags that you just 2005, I had 29 red flags that you just 2005, I had 29 red flags that you just couldn't miss on. But by 2005, the couldn't miss on. But by 2005, the couldn't miss on. But by 2005, the degree of certainty was approaching degree of certainty was approaching degree of certainty was approaching 100%. 100%. 100%. >> Over time, and with some simple math >> Over time, and with some simple math >> Over time, and with some simple math calculations, Marco Polus concluded that calculations, Marco Polus concluded that calculations, Marco Polus concluded that for maid off to execute the trading for maid off to execute the trading for maid off to execute the trading strategy he said he was using, he would strategy he said he was using, he would strategy he said he was using, he would have had to buy more options on the have had to buy more options on the have had to buy more options on the Chicago Options Exchange than actually Chicago Options Exchange than actually Chicago Options Exchange than actually existed. Yet he says no one he spoke to existed. Yet he says no one he spoke to existed. Yet he says no one he spoke to there remembered making a single trade there remembered making a single trade there remembered making a single trade with Bernie Maidoff's fund.

with Bernie Maidoff's fund. with Bernie Maidoff's fund. >> I would talk to the people I had trading >> I would talk to the people I had trading >> I would talk to the people I had trading relationships with and asked, "Did you relationships with and asked, "Did you relationships with and asked, "Did you have a trading relationship with Mr. have a trading relationship with Mr. have a trading relationship with Mr. Bernard Matto?" And they all said, "No, Bernard Matto?" And they all said, "No, Bernard Matto?" And they all said, "No, we don't think he's for real." we don't think he's for real." we don't think he's for real." >> Could you find anybody? >> Could you find anybody? >> Could you find anybody? >> I found no one that ever traded with Mr. >> I found no one that ever traded with Mr. >> I found no one that ever traded with Mr. Matto and I traded with the largest Matto and I traded with the largest Matto and I traded with the largest equity derivatives firms in the world. equity derivatives firms in the world. equity derivatives firms in the world. >> And that's because Maid Off's investment >> And that's because Maid Off's investment >> And that's because Maid Off's investment fund never actually made any trades, at fund never actually made any trades, at fund never actually made any trades, at least going back to 1993. and probably least going back to 1993. and probably least going back to 1993. and probably further a fact confirmed last week at a further a fact confirmed last week at a further a fact confirmed last week at a meeting of maid off investors by the meeting of maid off investors by the meeting of maid off investors by the trustee charged with liquidating his trustee charged with liquidating his trustee charged with liquidating his assets. No one knew the depth of the assets. No one knew the depth of the assets. No one knew the depth of the fraud, but a lot of people had fraud, but a lot of people had fraud, but a lot of people had questions. Who else figured this out questions. Who else figured this out questions. Who else figured this out besides you? besides you? besides you? >> I would say that hundreds of people >> I would say that hundreds of people >> I would say that hundreds of people suspected something was a miss with the suspected something was a miss with the suspected something was a miss with the manoff operation. If you look at who the manoff operation. If you look at who the manoff operation. If you look at who the victims were not, you'll notice that the victims were not, you'll notice that the victims were not, you'll notice that the major firms on Wall Street had no money major firms on Wall Street had no money major firms on Wall Street had no money with Mr. for manoff. with Mr. for manoff. with Mr. for manoff. >> I mean, you write in the this is the >> I mean, you write in the this is the >> I mean, you write in the this is the letter I'm quoting from the letter to letter I'm quoting from the letter to letter I'm quoting from the letter to the Securities and Exchange Commission, the Securities and Exchange Commission, the Securities and Exchange Commission, red flag number 20. Man off is suspected red flag number 20. Man off is suspected red flag number 20. Man off is suspected of being a fraud by some of the world's of being a fraud by some of the world's of being a fraud by some of the world's largest, most sophisticated financial largest, most sophisticated financial largest, most sophisticated financial services firms. And then you list some services firms. And then you list some services firms. And then you list some of the firms.

of the firms. of the firms. >> Yes, I do. >> Yes, I do. >> Yes, I do. >> The biggest firms on Wall Street and >> The biggest firms on Wall Street and >> The biggest firms on Wall Street and conversations with people high up in conversations with people high up in conversations with people high up in those firms. those firms. those firms. >> That is correct. And the SEC ignored >> That is correct. And the SEC ignored >> That is correct. And the SEC ignored that. that. that. >> Did they call any of these people? >> Did they call any of these people? >> Did they call any of these people? >> All the SEC had to do is pick up the >> All the SEC had to do is pick up the >> All the SEC had to do is pick up the phone. They never did. If you had phone. They never did. If you had phone. They never did. If you had executives at at the biggest investment executives at at the biggest investment executives at at the biggest investment houses in Wall Street that knew houses in Wall Street that knew houses in Wall Street that knew something was wrong, why do you think something was wrong, why do you think something was wrong, why do you think they didn't go to the SEC? they didn't go to the SEC? they didn't go to the SEC? >> Because people in glass houses don't >> Because people in glass houses don't >> Because people in glass houses don't throw stones and self-regulation and throw stones and self-regulation and throw stones and self-regulation and Wall Street doesn't work. Wall Street doesn't work. Wall Street doesn't work. >> In January 2006, the New York Office of >> In January 2006, the New York Office of >> In January 2006, the New York Office of the Securities and Exchange Commission the Securities and Exchange Commission the Securities and Exchange Commission finally opened a case file to look into finally opened a case file to look into finally opened a case file to look into Harry's allegations about Bernie Harry's allegations about Bernie Harry's allegations about Bernie Maidoff. Despite uncovering evidence Maidoff. Despite uncovering evidence Maidoff. Despite uncovering evidence that Maid Off had misled them about his that Maid Off had misled them about his that Maid Off had misled them about his investment activities, the SEC closed investment activities, the SEC closed investment activities, the SEC closed the case 11 months later without ever the case 11 months later without ever the case 11 months later without ever opening a formal investigation. The opening a formal investigation. The opening a formal investigation. The staff said there was no evidence of staff said there was no evidence of staff said there was no evidence of fraud. fraud. fraud. >> What I found out from my dealings with >> What I found out from my dealings with >> What I found out from my dealings with the SEC over 8 and a half years is that the SEC over 8 and a half years is that the SEC over 8 and a half years is that their people are totally untrained in their people are totally untrained in their people are totally untrained in finance. They're unschooled. Most of finance. They're unschooled. Most of finance. They're unschooled. Most of them are just merely lawyers without any them are just merely lawyers without any them are just merely lawyers without any financial industry experience. Well, if financial industry experience. Well, if financial industry experience. Well, if the people there aren't trained in the people there aren't trained in the people there aren't trained in securities work, what are they trained securities work, what are they trained securities work, what are they trained in?

in? in? >> How to look at pieces of paper that the >> How to look at pieces of paper that the >> How to look at pieces of paper that the securities laws require. They can check securities laws require. They can check securities laws require. They can check every piece of paper perfectly and find every piece of paper perfectly and find every piece of paper perfectly and find misdemeanors and they'll miss all the misdemeanors and they'll miss all the misdemeanors and they'll miss all the financial felonies that are occurring financial felonies that are occurring financial felonies that are occurring because they never look there. Even when because they never look there. Even when because they never look there. Even when pointed to fraud, they're incapable of pointed to fraud, they're incapable of pointed to fraud, they're incapable of finding fraud. finding fraud. finding fraud. >> No one at the SEC would talk to us on >> No one at the SEC would talk to us on >> No one at the SEC would talk to us on the record about Harry Maropololis's the record about Harry Maropololis's the record about Harry Maropololis's allegations. But one person who seemed allegations. But one person who seemed allegations. But one person who seemed to have had a high opinion of the agency to have had a high opinion of the agency to have had a high opinion of the agency was Bernie Maidoff. was Bernie Maidoff. was Bernie Maidoff. >> I'm very close with the regulator, so >> I'm very close with the regulator, so >> I'm very close with the regulator, so I'm not trying to say that they can't, I'm not trying to say that they can't, I'm not trying to say that they can't, you know, that what they do is bad. As a you know, that what they do is bad. As a you know, that what they do is bad. As a matter of fact, my niece just married matter of fact, my niece just married matter of fact, my niece just married one. one. one. >> Besides his niece's husband, who no >> Besides his niece's husband, who no >> Besides his niece's husband, who no longer works at the SEC, Maid Off has longer works at the SEC, Maid Off has longer works at the SEC, Maid Off has had long-standing ties to the agency and had long-standing ties to the agency and had long-standing ties to the agency and has been called upon to give advice. At has been called upon to give advice. At has been called upon to give advice. At this 2007 meeting of a nonprofit group this 2007 meeting of a nonprofit group this 2007 meeting of a nonprofit group called the Phil Octadis Center, Maid Off called the Phil Octadis Center, Maid Off called the Phil Octadis Center, Maid Off seemed to think the SEC was doing a seemed to think the SEC was doing a seemed to think the SEC was doing a great job. You know, in today's great job. You know, in today's great job. You know, in today's regulatory environment, it's virtually regulatory environment, it's virtually regulatory environment, it's virtually impossible to to violate rules. And this impossible to to violate rules. And this impossible to to violate rules. And this is something that the public really is something that the public really is something that the public really doesn't understand, but you it's doesn't understand, but you it's doesn't understand, but you it's impossible for you to go un for a impossible for you to go un for a impossible for you to go un for a violation to go undetected. Certainly violation to go undetected. Certainly violation to go undetected. Certainly not for a considerable period of time.

not for a considerable period of time. not for a considerable period of time. But don't try and tell that to the Phil But don't try and tell that to the Phil But don't try and tell that to the Phil Octades Center today. Its main Octades Center today. Its main Octades Center today. Its main benefactor, the Betty and Norman Levy benefactor, the Betty and Norman Levy benefactor, the Betty and Norman Levy Foundation, was fully invested in Maid Foundation, was fully invested in Maid Foundation, was fully invested in Maid Off, one of dozens of charitable Off, one of dozens of charitable Off, one of dozens of charitable organizations that have been devastated organizations that have been devastated organizations that have been devastated or wiped out. Maid Off's customer list, or wiped out. Maid Off's customer list, or wiped out. Maid Off's customer list, single spaced with small type, is 162 single spaced with small type, is 162 single spaced with small type, is 162 pages long with victims running the pages long with victims running the pages long with victims running the gamut from Hollywood royalty to a gamut from Hollywood royalty to a gamut from Hollywood royalty to a carpenters's pension fund in Syracuse, carpenters's pension fund in Syracuse, carpenters's pension fund in Syracuse, New York. New York. New York. Shelley Ledllo has been forced to put Shelley Ledllo has been forced to put Shelley Ledllo has been forced to put her mother in a Medicaid assisted living her mother in a Medicaid assisted living her mother in a Medicaid assisted living facility while she packed up their facility while she packed up their facility while she packed up their apartment to move in with a friend. All apartment to move in with a friend. All apartment to move in with a friend. All because of Bernie Maidoff. because of Bernie Maidoff. because of Bernie Maidoff. >> Their whole lives were turned upside >> Their whole lives were turned upside >> Their whole lives were turned upside down by this man that sits in his down by this man that sits in his down by this man that sits in his penthouse and smirks. The same day last week, 70 mi away, Len The same day last week, 70 mi away, Len and Marge Forest were leaving their and Marge Forest were leaving their and Marge Forest were leaving their house that they had just sold in house that they had just sold in house that they had just sold in Satocket, Long Island, and were Satocket, Long Island, and were Satocket, Long Island, and were preparing to drive to South Florida to preparing to drive to South Florida to preparing to drive to South Florida to sell their home there. They had their sell their home there. They had their sell their home there. They had their money with Bernie Maidoff for 30 years money with Bernie Maidoff for 30 years money with Bernie Maidoff for 30 years and lost an 8 figure family fortune 2 and lost an 8 figure family fortune 2 and lost an 8 figure family fortune 2 days before his 80th birthday.

days before his 80th birthday. days before his 80th birthday. >> Do you have any money to live on? >> Do you have any money to live on? >> Do you have any money to live on? >> Enough, I would say, for 60 days. >> Enough, I would say, for 60 days. >> Enough, I would say, for 60 days. >> Do you know other people who are in the >> Do you know other people who are in the >> Do you know other people who are in the same situation? Oh yes, we have lot same situation? Oh yes, we have lot same situation? Oh yes, we have lot unfortunately and I think probably the unfortunately and I think probably the unfortunately and I think probably the thing that tears me up more than thing that tears me up more than thing that tears me up more than anything is the fact that I recommended anything is the fact that I recommended anything is the fact that I recommended made off to a number of people and uh made off to a number of people and uh made off to a number of people and uh and they lost their money and I I'll and they lost their money and I I'll and they lost their money and I I'll never stop feeling responsible for that. never stop feeling responsible for that. never stop feeling responsible for that. They were all close family and friends. They were all close family and friends. They were all close family and friends. Len Forest and his friends thought they Len Forest and his friends thought they Len Forest and his friends thought they were part of a small exclusive group of were part of a small exclusive group of were part of a small exclusive group of investors lucky enough to have a investors lucky enough to have a investors lucky enough to have a connection with Bernie Maidoff. And connection with Bernie Maidoff. And connection with Bernie Maidoff. And because they thought they were making because they thought they were making because they thought they were making 12% a year, they weren't inclined to ask 12% a year, they weren't inclined to ask 12% a year, they weren't inclined to ask a lot of questions. Harry Maropololis a lot of questions. Harry Maropololis a lot of questions. Harry Maropololis called it the classic affinity scam. called it the classic affinity scam. called it the classic affinity scam. >> An affinity scam is where you pray on >> An affinity scam is where you pray on >> An affinity scam is where you pray on groups that are similar in nature to groups that are similar in nature to groups that are similar in nature to yourself. So I'm Greek. If I was going yourself. So I'm Greek. If I was going yourself. So I'm Greek. If I was going to run an affinity scam, I would run it to run an affinity scam, I would run it to run an affinity scam, I would run it on the Greek American community here. on the Greek American community here. on the Greek American community here. Bernie was Jewish, so he ran on the Bernie was Jewish, so he ran on the Bernie was Jewish, so he ran on the Jewish community in the United States.

Jewish community in the United States. Jewish community in the United States. But that didn't that wouldn't get him But that didn't that wouldn't get him But that didn't that wouldn't get him enough customers because he always enough customers because he always enough customers because he always needed new money to keep the scheme needed new money to keep the scheme needed new money to keep the scheme going. Over time, Maid Off extended his going. Over time, Maid Off extended his going. Over time, Maid Off extended his reach from New York to Palm Beach where reach from New York to Palm Beach where reach from New York to Palm Beach where he enlisted hundreds of wealthy clients. he enlisted hundreds of wealthy clients. he enlisted hundreds of wealthy clients. Many of them recruited from his own Many of them recruited from his own Many of them recruited from his own country clubs and he also made country clubs and he also made country clubs and he also made connections that gave him entree to connections that gave him entree to connections that gave him entree to Europe and the hedge fund capital of Europe and the hedge fund capital of Europe and the hedge fund capital of America, Greenwich, Connecticut. It was America, Greenwich, Connecticut. It was America, Greenwich, Connecticut. It was here that Bernie Maid off made some of here that Bernie Maid off made some of here that Bernie Maid off made some of his biggest deals with large investment his biggest deals with large investment his biggest deals with large investment firms that were willing to feed him firms that were willing to feed him firms that were willing to feed him billions of dollars of their clients billions of dollars of their clients billions of dollars of their clients money to manage. And in return, Bernie money to manage. And in return, Bernie money to manage. And in return, Bernie Maid off agreed to pay these so-called Maid off agreed to pay these so-called Maid off agreed to pay these so-called feeder funds a fortune in annual fees. feeder funds a fortune in annual fees. feeder funds a fortune in annual fees. The largest of the feeder funds was the The largest of the feeder funds was the The largest of the feeder funds was the Fairfield Greenwich Group. How much Fairfield Greenwich Group. How much Fairfield Greenwich Group. How much money did Fairfield make off Bernie Maid money did Fairfield make off Bernie Maid money did Fairfield make off Bernie Maid off every year? off every year? off every year? >> Hundreds of millions of dollars. If >> Hundreds of millions of dollars. If >> Hundreds of millions of dollars. If you're a feeder fund, what are you you're a feeder fund, what are you you're a feeder fund, what are you supposed to do for those hundreds of supposed to do for those hundreds of supposed to do for those hundreds of millions of dollars? millions of dollars? millions of dollars? >> You're supposed to identify the world's >> You're supposed to identify the world's >> You're supposed to identify the world's best hedge fund managers and invest only best hedge fund managers and invest only best hedge fund managers and invest only in them. And you're supposed to make in them. And you're supposed to make in them. And you're supposed to make sure they're not running Ponzi schemes. sure they're not running Ponzi schemes. sure they're not running Ponzi schemes. >> The real steroids here were the feeder >> The real steroids here were the feeder >> The real steroids here were the feeder funds. That's what made it an funds. That's what made it an funds. That's what made it an international international international Ponzi scheme. Attorney David Boy is one Ponzi scheme. Attorney David Boy is one Ponzi scheme. Attorney David Boy is one of the most prominent lawyers in the of the most prominent lawyers in the of the most prominent lawyers in the country and is representing Fairfield country and is representing Fairfield country and is representing Fairfield Greenwich investors who lost nearly $7 Greenwich investors who lost nearly $7 Greenwich investors who lost nearly $7 billion when Maid Off went under.

billion when Maid Off went under. billion when Maid Off went under. They're suing the firm for gross They're suing the firm for gross They're suing the firm for gross negligence, claiming it failed to negligence, claiming it failed to negligence, claiming it failed to investigate Maid Off thoroughly or investigate Maid Off thoroughly or investigate Maid Off thoroughly or monitor his activities as it promised to monitor his activities as it promised to monitor his activities as it promised to do in its marketing materials. do in its marketing materials. do in its marketing materials. >> Analysis of portfolio composition, >> Analysis of portfolio composition, >> Analysis of portfolio composition, portfolio stress testing, risk portfolio stress testing, risk portfolio stress testing, risk management, asset verification. Do you management, asset verification. Do you management, asset verification. Do you think that really happened? No, we know think that really happened? No, we know think that really happened? No, we know it didn't happen because we know all it didn't happen because we know all it didn't happen because we know all they did was turn the money over to they did was turn the money over to they did was turn the money over to Bernie Maid off and they did that for 20 Bernie Maid off and they did that for 20 Bernie Maid off and they did that for 20 years. years. years. >> They did nothing. >> They did nothing. >> They did nothing. >> They essentially did nothing except lose >> They essentially did nothing except lose >> They essentially did nothing except lose their investors money their investors money their investors money >> and enjoy very luxurious lifestyles from >> and enjoy very luxurious lifestyles from >> and enjoy very luxurious lifestyles from the money they took out. the money they took out. the money they took out. >> Walter Null, one of the founding >> Walter Null, one of the founding >> Walter Null, one of the founding partners of Fairfield Greenwich, partners of Fairfield Greenwich, partners of Fairfield Greenwich, declined to talk to us and has declined to talk to us and has declined to talk to us and has reportedly been lying low with his wife reportedly been lying low with his wife reportedly been lying low with his wife at their compound on the private island at their compound on the private island at their compound on the private island of Mystique. But in a statement to 60 of Mystique. But in a statement to 60 of Mystique. But in a statement to 60 Minutes, his firm said that it too was a Minutes, his firm said that it too was a Minutes, his firm said that it too was a victim of Bernie Maidoff, that it had victim of Bernie Maidoff, that it had victim of Bernie Maidoff, that it had placed too much trust in his then placed too much trust in his then placed too much trust in his then impeccable reputation and in the fact impeccable reputation and in the fact impeccable reputation and in the fact that there had been multiple reviews of that there had been multiple reviews of that there had been multiple reviews of Maid Off by the SEC.

Maid Off by the SEC. Maid Off by the SEC. >> Mr. WHAT DO YOU HAVE TO SAY FOR >> Mr. WHAT DO YOU HAVE TO SAY FOR >> Mr. WHAT DO YOU HAVE TO SAY FOR YOURSELF? YOURSELF? YOURSELF? >> In the end, Harry Mara Polus had been >> In the end, Harry Mara Polus had been >> In the end, Harry Mara Polus had been right about Bernie Maidoff. He will be right about Bernie Maidoff. He will be right about Bernie Maidoff. He will be going to prison, but not because of going to prison, but not because of going to prison, but not because of anything that Harry or the SEC did. In a anything that Harry or the SEC did. In a anything that Harry or the SEC did. In a bad economy, Maid Off's lies simply bad economy, Maid Off's lies simply bad economy, Maid Off's lies simply collapsed under their own weight. collapsed under their own weight. collapsed under their own weight. >> No one was investigating Mr. Matto at >> No one was investigating Mr. Matto at >> No one was investigating Mr. Matto at the end. the end. the end. >> So, he turned himself in before anybody >> So, he turned himself in before anybody >> So, he turned himself in before anybody in a position of authority began a in a position of authority began a in a position of authority began a serious investigation. serious investigation. serious investigation. >> That's typically how the SEC does it. They come in after the crime has been They come in after the crime has been committed. They towag the victims, count committed. They towag the victims, count committed. They towag the victims, count the bodies, and try to figure out who the bodies, and try to figure out who the bodies, and try to figure out who the crooks were after the fact, which the crooks were after the fact, which the crooks were after the fact, which does none of us any good.