Even swindlers consider some characters too untrustworthy. So testified the star witness in the New Haven Savings/NewAlliance white-collar crime trial in federal court. The witness (pictured outside federal court), the admitted mastermind of a $4.9 million get-rich-quick scam, told a yarn about a meeting at Geppi’s Restaurant that went sour and featured dialogue like this: “Once in a while a pit bull rips your leg off.”
The star witness was Robert R. Ross, a 61 year-old Manhattan-based millionaire investor who has pleaded guilty to arranging to pour $4.9 million of his own and his partners’ money into lucrative stock sales to which they weren’t legally entitled. He did it by giving the money to depositors of the old New Haven Savings Bank to buy favorably-priced stock in their own names in a 2004 initial public offering when the bank went public and became NewAlliance. The depositors turned over the stock to Ross, who immediately sold it when the stock began trading publicly and grabbed a 50 percent profit. He shared a bit of those profits with the depositors.
Ross is helping the feds try to convict a local middleman he allegedly engaged to find the depositors and carry out crucial errands in the transaction. Ross testified for the second day in federal court on Church Street Thursday in the trial of the 34 year-old middleman, Orange native and Yale School of Management alum John Lucarelli (pictured). This is believed to be the first trial of its kind in the country, as the federal government seeks to crack down on out-of-state investors who sleaze their way into initial public offerings when local mutual banks convert into stock corporations, and crowd out local depositors who have legitimate rights to buy more shares.
Unlike Robert Ross, John Lucarelli pleaded innocent. So even though he made little more than a tenth of the money Ross made on the deals, Lucarelli is staring at as much as 40 times as long a prison sentence — or up to 185 years, on various fraud charges.
Lucarelli’s job was allegedly to find people who had bank accounts at New Haven Savings Bank, then get them together with Ross, who’d convince them to take between $700,000 and $2.1 million to buy stock in their own names. Ross arranged seven such deals totaling $4.9 million; he put in $2.8 million of his own money, while funneling the remainder from two associates.
On the stand Thursday, Ross told about a Sunday morning meeting Lucarelli arranged with three prospective partners in the swindle shortly before the bank’s March 2004 IPO.
Two people there would eventually go in on the deal, John Querker, Sr. and John Querker Jr.
The third person present was the Grand Avenue restaurant’s owner, Giancarlo Accettullo. Accettullo opened the doors early that Sunday morning for the group to meet. They began speaking in the bar area by the front of the restaurant. Then Ross and Accettullo went downstairs to talk privately.
Ross asked Accettullo to go through his records of his accounts with New Haven Savings. Ross wanted to make sure he had at least $20,000 in the account in 2002 (a cut-off date for eligibility for depositors participating in the IPO). That would increase the chances that if the bank received more order for stock than it was offering — which indeed happened, to the tune of about $1.8 billion for a $1 billion offering — Accettullo would qualify to receive more stock than depositors with smaller balances.
Then Accettullo expressed some concerns of his own. Newspaper accounts were raising questions about the legality of these scams. Could he get in trouble?
Ross testified that he did acknowledge that his scheme involved some “regulatory problems.” (As in: government regulations said you can’t do it. So did bank officials.) But, Ross added, “historically there hasn’t been any action in that area.” Meaning: the government never prosecutes these crimes. Which, up until then, was true.
Ross said he “likened it” to a “‘Keep off the grass’ sign.”
“Most of the time when you walk on the grass, it’s fine,” he recalled telling Accettullo. “Once in a while a pit bull rips your leg off.”
Accettullo expressed a second concern, according to Ross. “He said, ‘I have a cash business, and I don’t want any scrutiny,” Ross recalled later in his testimony under cross-examination.
That made Ross queasy about Accettullo, he said. He said that after the meeting he and Lucarrelli discussed whether Accettullo was trustworthy enough to lend money to as part of the scam. “I didn’t feel instantly comfortable with him because he had some issues with his cash business.”
Ross’s queasiness increased in a subsequent encounter with Accettullo. Accettullo had considered not going in on the deal, but changed his mind. He wanted in. Ross said it was too late. Then Accettullo demanded $10,000, according to Ross; he claimed he had sought legal advice on whether to enter the deal, and that’s how much it cost.
That made Ross nervous, he testified. “I suggested he send the bill to me — which of course never arrived.”
One Little Lie
Assistant U.S. Attorney David Ring proceeded to lead Ross through details of the transactions with other depositors Lucarrelli lined up, whom he did trust enough to give the money. Copies of checks and bank statements and stock order forms and promissory notes flashed on a screen. Ross described how he kept 80 percent of the profits; the depositors got 20 percent, after 42 – 45 percent of the total (depending on the depositor) was taken out to pay taxes.
Ross spoke in a hushed, gravelly voice, so low that at one point the judge, Janet B. Arterton, interjected, “We need you to speak up, Mr. Ross. The jurors are having a hard time hearing you.”
Ross gained more of a voice once Lucarelli’s attorney, Dominic Amorosa, got his chance to cross-examine him — and immediately went after his credibility as a witness.
Amorosa cited a transcript of an interview Ross had with an FBI agent. In the transcript Ross recounted haggling with a partner over how much of a fee the partner should pay him for arranging to funnel his money to a New Haven Savings depositor in the IPO. Ross told the partner that another investor had paid him a fee for the same task. Ross told the FBI agent that he had made that part up.
“So,” Amorosa taunted Ross on the stand, “It wasn’t true.”
Ross: “It was a negotiating tactic.”
Amorosa: “You lied … in connection with a negotiation.”
Ross: “As part of a negotiation I was trying to get him around to pay a fee.”
“Do you think it’s OK,” Amorosa pressed on, “to lie in negotiations?”
“No,” responded Ross. “That’s ridiculous.”
Amorosa: “Is [this] the only lie you told to anybody in connection with the entire matter?”
Ross: “As best I know, yes… It was a negotiating tactic… I thought [the partner] was trying to take advantage of me, and I resorted to extraordinary measures.”
Ross is scheduled to complete his testimony when the trial resumes Monday morning. The defense expects to put on its case Tuesday or Wednesday, and take no more than a day.
For previous articles on the trial, click here and here and here.
