How Arthur Levitt Helped Ruin U.S. Economy

[Policing Wall Street]

The crimes which Levitt helped cover up in his capacity as Chairman of the American Stock Exchange and later as Chairman of the Securities and Exchange Commission (SEC) have helped destroyed the financial power of America. 

When America is relegated to “developing world” status because of the ruinous greed of the Wall Street elite, China and other countries shall erect a statue of people like Arthur Levitt thanking him for protecting his friends at the expense of America.

There are many financial scandals that should have been exposed long ago. Perhaps some of the financial meltdown would have been prevented. Let’s go through a few examples.

The mainstream press, The New York Times and The Wall Street Journal, have refused to examine the connection between Cohmad and Fairfield Greenwich and the American Stock Exchange (AMEX).  This has been done to protect Arthur Levitt.  The destruction of the American way of life and its inherent values of fair play and compassion for the poor mean nothing to the press barons that own The Wall Street Journal and The New York Times. 

 Arthur Levitt was more important than hard-working Americans.   So, the entire world has paid a horrific price for this protection.  To think that protecting Levitt, a member of the Harmonie Club, was more important than protecting America is so heinous to be beyond comprehension- or even imagination. And a brief examination of Levitt’s protection of Cohmad and Fairfield Greenwich Group, which supplied money to Bernard Madoff, will prove this statement.

The press has been easy on Maurice “Sonny” Cohn and Alvin “Sonny” Delaire.  But these individuals have a dark history- despite their prominence at the AMEX.  They were partners with Joe Kaufmann in the American Stock Exchange specialist unit, Cohn Delaire and Kaufmann.  So prominent was Cohn Delaire and Kaufmann that in the 1960s when a German television station visited the American Stock Exchange, a large segment of the documentary was devoted to this specialist unit.

But where there is prominence, there is often a secret past- a past that can explain the actions of Cohmad, an amalgam of the names of Maurice Cohn and Bernard Madoff, which placed investor money into Madoff’s Ponzi scheme.

Circa 1964 the specialist unit, Cohn Delaire and Kaufmann was fined and suspended for 10 days from membership in the American Stock Exchange for paying brokers to obtain orders.  In 1964 this was illegal and was a violation of the Securities Exchange Act of 1934.  At the time this violation of federal securities laws was punishable by up to two years in prison.

Years later Cohn, as a partner in Cohmad, received commissions for providing clients to Madoff’s scam.  Thus, the apple, once it is rotten, does not suddenly become edible. Also of interest is Alvin Delaire, Jr.  I had met Alvin Delaire at the American Stock Exchange when he was trading options in Merrill Lynch. 

One day circa 1985 I was trading options in Merrill when Delaire stated that he was leaving the Amex to work for a fund.  Delaire stated that he was not earning sufficient money in options trading.  Also present was Gene Mauro, a broker who was later to ignominiously trade for Oakford- a firm indicted for having NYSE floor brokers illegally trade for its account.

So Delaire decamped for the greener fields of Cohmad- and the result was the largest Ponzi scheme ever. 

But as I have pointed out in several previous columns it was the protection that Arthur Levitt provided to Bernard Madoff that prevented the Securities and Exchange Commission from investigating Bernard Madoff.

It was also Levitt’s misguided protection of former members of the American Stock Exchange that led to the protection of the feeder funds for Madoff.  And nowhere is that better illustrated than by Levitt’s protection of Fred Kolber, a founder of Fairfield Greenwich Group, and his brother, Mark Kolber when they were members of the American Stock Exchange.  Fairfield Greenwich Group had perhaps the largest feeder fund, a fund that invests in other hedge funds, Fairfield Sentry, for Bernard Madoff’s Ponzi scheme.

It has been reported in the press that Fred Kolber introduced Walter Noel to Madoff-and Jeff Tucker, a partner in Fairfield Greenwich, had been a partner with Fred Kolber. 

Contrary to published reports, Fred Kolber was not a specialist.  Fred Kolber was a market maker at the American Stock Exchange in the options of ASA.  The specialist unit in the options of ASA was Miceli-VanCaneghan, which was owned by Louis Miceli and Robert VanCaneghan.  Guess who provided the financing for Miceli-VanCaneghan in the late 1980s?  Bear Stearns, which Arthur Levitt, as Chairman of the Securities and Exchange Commission and then as a macher –“fixer”-- fiercely protected until the financial world began to collapse.

ASA was one of the top money making options at the American Stock Exchange.  Why?  Well, not only because the volume in the options of ASA was very high.  The prices in ASA were fixed.  Yes, Levitt permitted price fixing in ASA options at the American Stock Exchange- not only when Levitt was Chairman of the American Stock Exchange but also when Levitt was Chairman of the Securities and Exchange Commission. I had written numerous letters to the SEC, documenting price fixing in stock options at the AMEX, when Levitt was chairman. He did nothing and told the SEC not to act. Levitt and Alan Greenberg, Chairman of Bear Stearns, and Jim Cayne, who was also later Chairman of Bear, belonged to the Harmonie Club.

Levitt always covered for members of the Harmonie Club.

The options specialist in ASA calls, was incompetent.  This specialist had the market makers in the trading crowd establish the prices of the options.  Thus, with the agreement of all market makers, prices were fixed on a daily basis.  And until the crash of 1987 several options market makers in ASA earned up to $1 million per annum for merely going along with the price fixing of options prices. 

Every market maker had to go along with the crowd.  And this was not an option where an individual could even attempt to be honest- because the two partners in Miceli-VanCaneghan, Louis Miceli and Robert VanCaneghan, were members of the Board of the American Stock Exchange.  Cross them and the results were dire. Miceli and VanCaneghan could ruin a member by having him investigated by the exchange’s staff attorneys.

This was accomplished by merely mentioning the name of the market maker to Trading Analysis-and yes, I personally witnessed such an incident in the options of Texaco, another option in which Miceli-VanCaneghan was the specialist. 

Fred Kolber has portrayed himself in the press as an expert on options.  If that is true, Fred had to have known that Madoff’s option strategy was a fraud.  Fred knew that even options specialists at the Amex, who not only rigged the options market but also had a monopoly on the option, never earned money every month. 

But it has been reported that Fred Kolber had two funds Fairfield Strategies c/o Fred Kolber and Fairfield International c/o Fred Kolber invest in Madoff’s scam.

In 2002 Fred Kolber had a party for his wife in Stockholm.  The Noel family, whose patriarch Walter Noel was the principal in Fairfield Greenwich Group (FGG),  was present.  Monica, the wife of Walter Noel, led a rendition of Money (That’s All I Want).  I would like to know the amount of money Fred received from investing his client’s money in Madoff’s scam.

Mark Kolber did not trade ASA.  Mark Kolber traded Lilly, another option owned jointly by Miceli-VanCaneghan and Highland Securities-but Highland Securities ran the trading.  In this option the prices were so fixed that only two Amex market makers were permitted to trade. When a third market maker joined the trading crowd, he encountered much hostility- especially from the specialist.  Eventually he was permitted to trade Lilly because the market making firm that firm he represented had one hundred million dollars in capital at that time.

The prices were so fixed and the trading so controlled that more complaints were filed against the specialist in Lilly than any other option at the Amex.  The markets were so skewed that one major investment firm, Morgan Stanley, swore that when Lilly options were listed on another exchange, Morgan would never execute another trade in Lilly options at the Amex.

And while he was Chairman of the American Stock Exchange and later as Chairman of the Securities and Exchange Commission, Levitt permitted the specialist in Lilly to steal in excess of $50 million from the American public.  Mark Kolber assisted in this theft by not making markets as he was required.

But during periods when there was a lull in trading, Mark would speak of tax avoidance schemes- at Fairfield Greenwich Group.

Mark Kolber would regale Amex members with factual stories of tax fraud and money laundering.  Mark stated that the partners in Fairfield Greenwich would purchase million dollar paintings in New York City, have them delivered to Greenwich, Connecticut, and declare that the paintings were purchased in Greenwich.  The raison d’être:  Avoidance of New York sales tax.

Mark also stated that one of the partners in Fairfield Greenwich purchased a piece of jewelry for $300,000 in New York City and had the jewelry delivered to Connecticut by limo to avoid paying the sales tax. But there was something even more interesting than price fixing.  Something more sinister that was a topic of conversation. Money laundering.

Mark stated that his brother, Fred, was into managing money for wealthy foreigners.  Mark stated that the money was sent into the United States by individuals seeking to hide the money from the tax authorities of their countries.

The specialist in Lilly was no stranger to discussions of money laundering and he would occasionally mention that a relative owned a private bank in Switzerland and that this individual was involved in money laundering.

Option price fixing, tax fraud, and money laundering occurred when Levitt was Chairman of the American Stock Exchange and later Chairman of the Securities and Exchange Commission.

And whatever may be said about Levitt’s knowledge of the money laundering of Fairfield Greenwich, it is known that Levitt ordered the Securities and Exchange Commission not to investigate my charges of widespread option price fixing, which was subsequently exposed in a April 1999 Business Week cover story, “Scandal On Wall Street”- on the basis of information that I had provided.

In 1993 I was told by an Assistant U.S. Attorney and FBI Special agent that Levitt used his influence as Chairman of the Securities and Exchange Commission to prevent a Department of Justice indictment of the principals of Miceli-VanCaneghan for participating in the stock fraud, PNF; taking payoffs from the Italian Mafia to introduce the stock; and laundering drug money from the Cayman Islands.

But more of that in a future article.

Arthur Levitt has turned my country, the United States, into a brothel so that his friends could steal money from Americans.


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