Alabama Securities Commission
11:20 am
Sun December 22, 2013

The Wolf Of Wall Street Vs. The Alabama Securities Comission

  The Wolf of Wall Street hits theaters this week. Leonardo DiCaprio stars as Jordan Belfort, a high powered stock broker who was later indicted for securities fraud. That may sound like a fictional story from the world of Hollywood. But, the story of Jordan Belfort, who was indicted on securities fraud for stock market manipulation and running a penny stock boiler room is painfully true.

“When they formed the company and the company itself Stratton Oakmont and those others had all those shares that they paid a penny for,” says Joe Borg, Director of the Alabama Securities Commission. “So when they built up the frenzy and they got up to five, ten dollars and they sold it all and then they quit, well guess what happened to the value of the company? There was no more interest and it collapsed back down to pennies.”

This kind of scheme is called a pump and dump. And, this real life incident cost investors close to 200 million dollars. Borg formed a multi-state task force that led to the prosecution of Belfort’s company after his office was inundated with complaints. Now that he’s out of prison, Belfort wrote a memoir called the Wolf of Wall Street which was turned into a movie.

“If we’re going to glorify the Wolf of Wall Street maybe cockroaches of Wall Street would be better,” says Borg. “I think by glorifying this we’re sending the wrong message to especially our younger business folks that hey so he spent some time in jail maybe it’s worth it if I can get a book deal or movie deal.”

When Hollywood or the press talk about cases of securities fraud, it often focuses on the bad guys like the Jordan Belfort’s and Bernie Madoff’s. Rarely, it seems, do we hear about the good guys and maybe even less about the people who were cheated.

“If we can keep the industry clean, the brokers doing what they’re supposed to do, and the crooks out chances are the population will never hear of us,” says Borg. “And that’s what we want, we want them to feel that this is a safe place to invest and that the folks they’re dealing with are straight. Now that’s not going to happen all the time.”

So how do you avoid being the next victim of the next Bernie Madoff? One source of help is the Alabama Securities Commission.

“In order for our agency to be able to kick in and assist we need to have a security involved or a secure transaction,” says Stephen Feaga, lead prosecutor for the Alabama Securities Commission.”

A security includes stocks and bonds but also any situation where you turn your money over to somebody else to manage. Just as securities come in all types, so do the schemes to defraud people. The more complicated the scheme, the harder it is to investigate. Ricky Locklar is a senior special agent with the ASC. But successful investigations all hinge on the same principle...follow the money.

“It all depends on whether or not we can get the bank records in and once we do what kind of volume is that?” says Locklar. “Is it going to be three or four years of bank records with ten thousand transactions a month and if so that then somebody has to put all that in a spreadsheet and then you have to have that analyzed.”

That process can take months and even years. However, the average investigation for the ASC runs about a year. Other issues that may stretch out an investigation is where the crimes take place and where the bad guys are.

“It doesn't sound complex but a promissory note scheme that may last four or five years and you got victims in maybe half a dozen states,” says Locklar. “And you have to track all those victims down to get all their records to track down their bank account information to follow that money and find out out where it went and how it was spent. Those can take time just going through all those different banks accounts.”

The ASC has helped shut down operations all over the United States. Alabama investigators have also tracked fraudsters to foreign countries to have their day in court. That's where Stephen Feaga comes in.

“For us it's putting that case on giving these people an opportunity to come in and tell a jury and a judge what happened to them while that defendant, while that person that did what he's doing to them is sitting over there and he is having to listen to that and then the day that jury comes back and they convict and we know that person is going to pay a heavy price for what they did to these people.”

Feaga says part of the enforcement and regulatory process is getting the word out on securities fraud.

“When we do prosecute somebody getting the word out to the criminal community that if you come into Alabama and you commit a securities fraud we will hunt you down, we will indict you, and we will lock you up okay we have one of the best enforcement statutes in the country.”

In fact the Alabama Securities Commission is often ranked among the top commissions in the country. They have a 95 percent conviction rate, which is the best in the country. But most importantly they look to prevent others from being defrauded.

“Almost everyday of the week we're out somewhere somebody in this office speaking to a group or an audience,” says Feaga. “One of the things we try to communicate to everybody is look if it sounds too good to be true if they're promising you returns that you've never heard of or you can't get anywhere else you should be very suspicious. Call in ask somebody.”

Because a phone call might just save you from being the subject of somebody's next con and possibly next movie.