When Paul Taboada ran Charles Morgan Securities Inc. at 120 Wall St., he set himself apart by wearing suits with the brokerage’s name stitched into the pinstripes.
He ran into trouble within a few years. A client was sent to jail in 2010 for a fraud prosecutors alleged Taboada facilitated. Customers complained about a fund he set up to invest in Facebook Inc. before it went public. That didn’t slow him down. He shut the firm amid an investigation by regulators and moved to Blackwall Capital Markets Inc. at 100 Wall St., where trainees call hundreds of strangers a day to pitch stocks.
“What Wall Street does is it affords the common man participation in deals the institutions are doing,” said Taboada, 49, who hasn’t been sanctioned in either matter.
Twenty years after Jordan Belfort and his Stratton Oakmont Inc. defrauded investors out of more than $200 million from its offices on Long Island -- a story retold in the movie “The Wolf of Wall Street” -- New York’s financial district has become a hub for veterans of defunct boiler rooms who use decades-old scripts to pressure investors into speculative trades, more than 40 current and former brokers said in interviews.
“They’re preying on the few people who still answer a landline phone,” said Joshua Brown, chief executive officer of Ritholtz Wealth Management in New York, whose 2012 book “Backstage Wall Street” described the sales tactics. “You pitch 50 guys a stock, and you pitch 50 guys another. If one goes higher, you go back to that pile.”
Chop Shops
There are at least 15 chop shops, as brokers call them, within a few blocks of the New York Stock Exchange, even after one of the biggest, John Thomas Financial Inc. of 14 Wall St., closed last year. Except for Deutsche Bank AG at 60 Wall St., big banks moved their headquarters from the area’s cobblestone streets to more spacious offices elsewhere in Manhattan.
Three brokerages that use cold-calling are at 40 Wall St., the 72-story skyscraper built in the 1920s for the Manhattan Company, a predecessor of JPMorgan Chase & Co. founded by Aaron Burr, the third vice president of the U.S. The tower, now called the Trump Building, also houses two securities firms that are under investigation.
Sean Scott, 27, said he made $20,000 in a good month pitching investors over the phone at one of the brokerages, John Carris Investments LLC, on the 17th floor.
“A broker can make a hell of a lot of money just making a few trades here, a few trades there,” said Scott, who worked there in 2011 and is now an adviser at Bank of America Corp.’s Merrill Lynch in Florida.