NEW YORK (TheStreet) -- Robert Bales, accused killer of 16 Afghan civilians, at one time had ambitions to become a Wall Street Master of the Universe the old-fashioned way: by ripping off the public, working alongside Mob-linked stockbrokers.
It's not clear to what extent Bales' life was influenced by his days as a stockbroker for marginal-to-sleazy brokerages in Florida and Ohio. But it must have been significant, because he spent four years in the armpit of the securities industry.
In recent days, attention has focused on an NASD arbitration award from 2003, which he did not contest, stemming from his days as a stockbroker in the 1990s. It found Bales and other brokers liable for ripping off an elderly Ohio couple, and ordered him and others to pay $1.5 million. That turns out to have been just one episode from Bales' four-year journey through the bottom-feeding netherworld of the microcap market -- the world of boiler rooms, overvalued stocks and systematic investor rip-offs.
Bales worked for five brokerages from 1996 to 2000 -- including one firm, the Hamilton-Shea Group, whose undisclosed principals later pleaded guilty to felonies and had Mob ties. Their firm was subsequently expelled from the securities industry. Interestingly, Financial Industry Regulatory Authority records show that three of the firms where Bales worked were interconnected, and linked -- through personal or corporate ties -- to Hamilton-Shea. That would seem to indicate that Bales may have been part of a "crew" of brokers who moved from place to place during the 1990s. However, that could not be independently confirmed.
Though Bales himself had no known connection to the mob, a person intimately familiar with the players of the era tells me that Hamilton-Shea was under the undisclosed control of two heavy-hitter penny-stock brokers who had connections to Philip C. Abramo, a capo in the DeCavalcante crime family and one of the leading Mafia figures involved in microcap brokerages during the era.
According to FINRA records, Bales began work at Hamilton-Shea in Pompano Beach, Fla., in July 1996, the same month in which he passed his Series 7 broker license. It was customary in those days for brokers to work for firms as unlicensed cold-callers before they obtained brokerage licenses. However, it's not known if Bales worked at Hamilton-Shea before getting his license.
Hamilton-Shea employed two former honchos of the notorious Joseph Roberts & Co. penny-stock firm, Joseph DeSanto and Robert B. DiMarco Jr., who shifted to Hamilton-Shea after the demise of "Jay-Rob." According to the Securities and Exchange Commission in civil proceedings against
, the two men were undisclosed principals of Hamilton-Shea while Bales was working there. They almost certainly would have hired him, and guided the young man in this early stage of his career.
DeSanto and DiMarco pleaded guilty to federal fraud charges in 2002 and 2001, respectively, during a nationwide crackdown on penny-stock firms. DeSanto was sentenced to five years in prison, while DiMarco was let off relatively easy, with five years probation.
According to my source, DeSanto and DiMarco were involved with Abramo and his deputy, Phil Gurian, during their Joseph Roberts days, but not at Hamilton-Shea. So that means Bales was spared the dubious pleasure of dealing with the smooth-talking, college-educated Abramo, who, along with Gurian, was later convicted of multiple securities fraud counts. Abramo remains in prison.
Bales left Hamilton-Shea in January 1997, according to FINRA records, but there is evidence that he did not leave the Hamilton-Shea orbit. His next stop was in Columbus, Ohio, where he worked for a firm called Quantum Capital Corp. According to FINRA records, Hamilton-Shea is known by another name -- Quantum Capital Corp. The Quantum that employed Bales and Hamilton-Shea have different CRD and SEC numbers, but this seems to be more than just a coincidence, even if they were separately organized.
Bales left Quantum Capital to join Michael Patterson Inc., also in Columbus. He was with that firm when he got in the hot water that led to the arbitration case. He worked there from March 1996 to October 1999. Quantum and Michael Patterson were not total strangers. According to NASD disciplinary records, the principal of Michael Patterson Inc., the eponymous Michael Patterson, had formerly been employed by Quantum. As I'll describe later, the two firms were both swept together in an NASD disciplinary action.
After leaving Michael Patterson Inc. in October 1999, Bales went over to another Ohio firm called Capital Securities of America, where he worked for 10 months, and then moved to his final employer in the securities industry, Quantum Securities Corp. He was there from September through December 2000, after which he dropped out of sight, as far as securities employment is concerned.
When Bales worked at Quantum Securities, he must have felt right at home, because the chief financial officer and chief compliance officer of that firm (later known as Regis Securities), Nancy Arnett Vargo, is listed in FINRA records as the president and majority owner of Quantum Capital Corp. Vargo, who worked for Hamilton-Shea in Pompano Beach from April 1995 to December 1996 -- overlapping with Bales -- was never accused of any wrongdoing, and was not named in the Bales arbitration or any other arbitration case.
The rest, as they say, is history. Having failed to leave much of a mark as a stockbroker, except for a serious accusation of unauthorized trading and misrepresentation that he never contested, Bales went on to join the Army after Sept. 11, 2001. The arbitration case dragged on through 2003. It involved trading in the stock of Life Diagnostics Inc. and Stearns & Lehman Inc., unspecified bank stocks, Orange County bonds, and a mortgage-backed security known as a REMIC, or "real estate mortgage investment conduit."
It's not known which of those were pitched to the victim by Bales. What we do know is that by the time the judgment was handed down in 2003, Bales was an Army sergeant and hardly able to fork over a million bucks to anybody.
All of his former employers, meanwhile, have gone to that great boiler room in the sky. In 2002, after multiple disciplinary actions and complaints, Hamilton-Shea was fined $1.38 million and expelled from membership in the NASD. Michael Patterson Inc. was expelled from the securities industry, and its owner, Patterson, was permanently barred, in a 2002 NASD case in which he neither admitted nor denied charges of overcharging muni-bond customers. It was like old home week at the NASD, as Quantum Capital was censured in the same proceeding. The two firms had a secret arrangement in which Michael Patterson Inc. placed all its trades through Quantum, in violation of a slew of rules.
By then, Quantum was defunct. Quantum Securities followed in 2008. Capital Securities of America, after being hammered by multiple NASD and state regulatory fines and censures, was acquired in 2007 by Wunderlich Securities.
But that apparently was not Bales' only flirtation with seeking his fortune in finance.
"Florida records show that Bales was a director at an inactive company called Spartina Investments Inc. in Doral, Fla." Nothing ever came of it. Like a lot of schemes during those years, it just never happened, and would remain forever swathed in obscurity were it not for a horrific day in Afghanistan in 2012.
Gary Weiss' most recent book, AYN RAND NATION: The Hidden Struggle for America's Soul, was published by St. Martin's Press on Feb. 28.
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