NEW YORK -- A jury Monday found five former executives of Princeton/Newport Partners and a former trader at Drexel Burnham Lambert Inc. guilty of virtually all charges against them in a federal racketeering and fraud case.
Only two of the defendants were cleared of a single count each in the 64-count indictment accusing them of conspiring to cheat on taxes by creating losses through rigged securities trades.
The case marked the first time the federal Racketeer Influenced and Corrupt Organizations act was used against executives at a securities firm and was considered a test of how effective the RICO law may be in the prosecution of securities-related cases.
The jury in U.S. District Court in Manhattan reached its verdicts after two full days of deliberations at the end of the five-week-old trial.
Members of the defendants' families cried and sobbed as the jury foreman read through the lengthy verdict sheet, which took about 15 minutes.
One woman cried out, 'No, no' the first few times a guilty verdict was pronounced against one of the defendants, 33-year-old Steven Smotrich, former controller at Princeton/Newport.
During the polling of the jury, former Princeton/Newport general partner Paul Berkman reached over the railing in the courtroom to clasp his wife's hand.
Convicted on all counts were former Princeton/Newport managing partner James Regan, 46, of Pennington, N.J.; general partner Jack Rabinowitz, 42, of Princeton, N.J.; Berkman, 42, also of Princeton; and Smotrich, of Belle Meade, N.J.
Convicted of all charges except one fraud count involving stock sales were Charles Zarzecki, 40, also of Princeton and a former general partner at Princeton/Newport, and former Drexel junk bond trader Bruce Lee Newberg, 31, of Santa Monica, Calif. and a former aide to Drexel junk bond king Michael Milken.
The six were convicted of selling securities at a loss and then, under a prior arrangement, buying them back at the same or slightly higher pices. The practice is known as stock parking.
They were ordered to return to court Tuesday for proceedings to determine how much of their assets they will have to forfeit under the RICO conviction.
No sentencing date was set.
Prosecutor Neil Cartusciello declined to comment on the case, pending the outcome of Tuesday's court session before U.S. District Judge Robert Carter.
The defense argued the six were involved in legal transactions and none benefitted financially from the trades.
Among those testifying during the trial was Drexel's chief executive officer Frederick Joseph. The prosecution also relied heavily on taped telephone conversations among the defendants.
Princeton/Newport, located in Princeton and in Newport Beach, Calif., ceased operations last year after its top executives were indicted.
Newberg is named along with Milken in a separate indictment accusing them of racketeering, securities and tax fraud and other charges.
Five former executives of Princeton-Newport Partners and a former trader at Drexel Burnham Lambert Inc. were convicted Monday of conspiring to cheat on taxes by creating losses through rigged securities trades.
Only two of the defendants were cleared of a single count each in the 64-count indictment that marked the first time the federal Racketeer Influenced and Corrupt Organizations act was used against executives at a securities firm.
The jury in U.S. District Court in Manhattan reached its verdicts after two full days of deliberations at the end of the 5-week trial, which was considered a test of how effective the RICO law may be in the prosecution of securities-related cases.
Members of the defendants' families wept as the jury foreman read through the long verdict sheet, which took about 15 minutes. One woman cried out, 'No! No!' the first few times guilty verdicts were pronounced against one of the defendants, 33-year-old Steven Smotrich, former controller at Princeton-Newport.
During the polling of the jury, former Princeton-Newport general partner Paul Berkman reached over the railing in the courtroom to clasp his wife's hand.
Convicted on all counts were former Princeton-Newport managing partner James Regan, 46, of Pennington, N.J.; general partner Jack Rabinowitz, 42, of Princeton, N.J.; Berkman, 42, also of Princeton, and Smotrich, of Belle Meade, N.J.
Convicted of all charges except one fraud count involving stock sales were Charles Zarzecki, 40, also of Princeton and a former general partner at Princeton-Newport, and former Drexel junk bond trader Bruce Lee Newberg, 31, of Santa Monica, Calif., who is a former aide to Drexel junk bond king Michael Milken.
The six were convicted of selling securities at a loss and then, under a prior arrangement, buying them back at the same or slightly higher pices. The resulting artificial loss is then written off on taxes. The practice is known as stock parking.
They were ordered to return to court Tuesday for proceedings to determine how much of their assets they will have to forfeit under the RICO conviction.
No sentencing date was set.
Prosecutor Neil Cartusciello declined to comment on the case, pending the outcome of Tuesday's court session before U.S. District Judge Robert Carter.
The defense argued the six were involved in legal transactions and none benefitted financially from the trades.
Among those testifying during the trial was Drexel's chief executive officer Frederick Joseph. The prosecution also relied heavily on taped telephone conversations among the defendants.
Princeton-Newport, based in Princeton and in Newport Beach, Calif., ceased operations last year after its top executives were indicted.
Newberg is named along with Milken in a separate indictment accusing them of racketeering, securities and tax fraud and other charges.
