Perhaps the most famous scam of all was Goldcor, which also had links to other crimes – drug-running and penny-stock hustling…in Florida, of all places. Florida was also the center of mortgage-hustling and land speculation, not just recently but historically.

And the Florida crime circuit, like Madoff’s, had its New York outlet.

According to this piece, Fool’s Gold, by Craig Malisow:

“In 1987, Jerold Weinger was the CEO of a Wall Street brokerage firm crushed under an avalanche of coke.

One of the firm’s partners, six brokers and a receptionist were arrested in a massive U.S. Drug Enforcement Administration Wall Street sweep called Operation Closing Bell. A ninth employee was arrested in the firm’s Florida office. Partner Wayne Robbins ultimately pleaded guilty to drug charges, and seven of the eight others either pleaded or were found guilty of possession, distribution or conspiracy to distribute cocaine, according to the DEA’s New York office…..

“The firm had been in trouble even before the 1987 busts, according to a New York Times investigation, which revealed that the U.S. Securities and Exchange Commission charged the firm with stock manipulation once in 1976 and twice in 1981. The firm settled each charge without admitting guilt, but was ultimately suspended from underwriting “over-the-counter” stocks for two and a half years……

The final blow came in 1991, when the National Association of Securities Dealers fined the firm $1.4 million for manipulating stock prices. The firm was booted out of the association, and its top officer, Michael Leeds, was banned from the industry….”

Lila here:

So you see, drug dealing and stock fraud were connected way back in the 1980s. About when Bernie Madoff began running his scam. And apparently, the SEC could and did move against some players successfully. Why not on Madoff then?

Especially when Weinger was no small potato. He was connected to another big-time operator, Joel Nadel.

The Malisow piece describes one of Nadel’s most infamous schemes:

“The SEC had already banned Nadel from the stock market 20 years earlier, but now the commission accused him of accepting bribes to tout worthless penny stocks in his bogus newsletters.

The New York Times, the Boston Globe and several Florida newspapers ran stories on Nadel in the late 1980s and early 1990s, culminating with his participation in the Goldcor scandal.

In Nadel’s newsletters, including one from the fictitious “Royal Society of Liechtenstein,” he praised a company called Goldcor, whose founders said they invented a process to turn a 20-mile strip of black volcanic Costa Rican beach sand into gold.

“The sands that are removed from the beach are replenished by tidal action only after a few days,” wrote Nadel, who was not a partner in Goldcor. The scam was so elaborate that, according to The Washington Post, Goldcor’s principals flew prospective investors to Costa Rica in Learjets so they could visit the company’s laboratories and watch white-coated scientists turn sand into gold.

In April 1991, the government froze $6.6 million of Nadel’s assets; in August, Goldcor President Richard Brown was found in his home with a bullet behind his left ear; in November, a federal judge ordered Goldcor representative Carl Martin to refund $10.8 million to investors. An estimated 3,000 investors lost at least $50 million in the scam.”

The most interesting part of this little history is that the Royal Society of Liechtenstein was sold off, changing its name to the Oxford Club, which has been since then a part of Agora Inc. (Update, April 8, 2010: It merged with a pre-existing newsletter, The Passport Club (according to Agora’s website).

The Brown death was never seriously investigated, say some SEC officials, who believe it was a murder.

What’s even more interesting is that Nadel’s Chief Operating Office, Mark Ford, who was also banned from selling stocks directly as a result of the settlement with the SEC, changed his name to Michael Masterson, and followed the Royal Society of Liechtenstein to Agora Inc., as part of Oxford Club and as a consultant).