The Securities Snatchers

One of the great bank robberies of all time was pulled off early this month without a hint that it was happening. The loot was not cash but $15.3 million in negotiable Treasury bills. The certificates simply vanished from a locked and guarded room at headquarters of the Chase Manhattan Bank during normal business hours. Last week the FBI and New York City detectives were still looking for the bills and for clues.

The Chase job made 1973 a banner year for Wall Street's outlaw satellite, the market in hot stocks, bonds and other securities. The total take is enormous. W. Henry DuPont, chairman of a firm that keeps track of missing securities, estimates that $50 billion in illegitimate paper is afloat, most of it blue-chip stocks and some of it federal, state, municipal and corporate bonds. Insurance companies are the ultimate victims. They must make good to any insured bank or brokerage house that takes a loss by theft or by buying hot securities in good faith. Most banks and brokerages are covered. The individual investor can recover any losses if securities held for him by an insured bank or brokerage are stolen.

Sam Bard, a consultant to brokerages on internal-security problems, tells how the thievery developed: "The Street used to operate on a handshake. But all of a sudden, brokers had to enlarge their staffs to meet increased trading volume. The type of employees changed. Some of the new ones did not have a moral obligation to the firm. The Mob moved in at the end of 1966. As volume picked up still further, clerks began to make good money. Many took to gambling and got in over their heads, borrowing from Shylocks to pay their debts. Eventually they were forced to bring out securities on demand to pay the Shylocks."

Witness Patsy Lepera testified to a Senate investigating subcommittee last month that "we got to the point where we put orders in. You get what you want in 24 hours, sometimes less." Lepera added, "You could never begin to operate if you didn't have crooked bankers, crooked C.P.A.s, crooked brokers. Everybody looks the other way or they get their hand cut."

Defaulted Loans. The mobsters often sell the hot securities at a discount. In other cases, the Mob uses the paper to set up corporations--some legitimate, others dummies for the purpose of borrowing more money. Sometimes the mobsters use the securities as collateral for personal loans. Too many U.S. bankers, eager for business, accept these securities without checking their validity.

Foreign bankers are often just as careless, accepting deposits of stolen or counterfeit stock and issuing letters of credit, which form the basis for loans from other banks. The loans are defaulted, and the mobsters pocket the cash.

Wall Street officials, municipal police and several Government agencies are on the trail of the securities snatchers, but police work is hampered by duplicated efforts and buck passing. One of the more promising steps has been taken by the New York Stock and Pacific Coast Stock Exchanges. They have begun transferring securities by bookkeeping, using a computer. This system could eventually eliminate the hand-to-hand transfer of certificates, often by messenger, a casual practice that is at the heart of most thefts.

Left to their own shifty devices, the crooks sometimes do themselves in. Swindler Louis Mastriana told the Senate subcommittee in September that he had nicked a Las Vegas casino for $40,000 in cash, using letters of credit based on stolen stock. Before he left town, the casino took it all back from him at the craps table.

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