No Way to Treat a Fraudster

Louis Pasciuto was convicted of securities fraud, but he went to jail because he cooperated with me in writing a book

By Gary Weiss

On May 7, at the federal courthouse in lower Manhattan, an admitted stock swindler named Louis Pasciuto was sentenced to 30 months in prison. To a casual observer, Pasciuto's punishment might not seem all that severe. The 30-year-old, tattooed native of New York City's Staten Island borough had pleaded guilty to three counts of securities fraud. During an eight-year rampage through 1990s Wall Street, Pasciuto ripped off investors for millions of dollars, sharing the proceeds with a rat's nest of odious Mob figures.

Good riddance, you might say. What's wrong with this guy going to the clink? Only this: Pasciuto was being sent to prison not because of anything that he did to investors, but because of what he did to me.

He talked to me.


  So here's the story of how a not-very-nice guy was punished for some not-very-nice reasons. Pasciuto is serving jail time despite extensive cooperation with the government -- which ordinarily would have meant little or no prison time -- because he was the principal source for a book that I wrote about the Mob's infiltration of Wall Street.

Prison sentences are supposed to send a message to the community, and Pasciuto's is loud and clear: If you're a cooperating witness, and the government has any say in the matter, the First Amendment doesn't apply to you. Outside of the courtrooms and government offices, keep your mouth shut.

The book I wrote about Pasciuto's career in crime was called Born to Steal: When the Mafia Hit Wall Street. It was published by Warner Books last May and excerpted in BusinessWeek at the time. The book provides anything but a glamorous, Sopranos-like portrait of the Mob. Its gangsters are real-life criminals -- thugs, morons, and cowards. So I had expected that there could be repercussions when the book appeared. And there were -- but not from the Mob.


  According to Pasciuto and his lawyer, Robert Baum, federal prosecutors were furious from the moment Born to Steal appeared. Under the terms of his cooperation agreement, Pasciuto had not been prohibited from telling his story to a writer or even writing a book himself. But the government was miffed -- and soon displayed its displeasure in a very concrete way. Pasciuto was out on bail as he awaited sentencing, and a year ago prosecutors moved to have him put back in prison, ostensibly "for his own safety."

The Authors Guild and other publishing-industry groups objected, and the government backed off. Pasciuto eventually caved in, out of fear that a prolonged fight with the government would accomplish nothing. He was imprisoned at Metropolitan Correctional Center in New York City, where he saw some familiar faces. Among his prison-mates were more than a half-dozen ranking Mafia figures, including Philip C. Abramo -- a reputed DeCavalcante crime family capo who's mentioned in the book.

As he made new "friends," like Abramo, Pasciuto awaited sentencing. Federal guidelines called for a four-year prison term. But during his years as a government informant, which included wearing a "wire" and secretly recording chats with his old pals, Pasciuto had helped the feds make cases against 18 crooked brokers and gangsters -- an extraordinarily high number for an informant.

Ordinarily, that degree of cooperation would have been sufficient to earn his release, even if he hadn't already spent 14 months in jail. In return for his cooperation, prosecutors had promised to describe it in a letter to the sentencing judge.


  They wrote the letter, all right. But it did more than just provide a breathtakingly unenthusiastic description of Pasciuto's cooperation. It went on to attack Pasciuto at length for his "criminal exploitation of the American public" -- a trashing that, lawyers tell me, is pretty much unheard-of in a letter that's sent to a judge seeking a reduced sentence for a cooperator. As Baum tersely puts it, the letter "departs from the norm in its attacks on Louis." That's putting it mildly. It reads more like an indictment than an appeal for clemency.

In a lengthy discussion of Born to Steal, prosecutors accused Pasciuto of concealing from the government his cooperation with me -- which was probably true, for the simple fact that he had absolutely no obligation to reveal it (because of an inconvenient little document called the "First Amendment"). Neither did I, though apparently the government felt that I had been sorely lacking in that regard, specifically by not bringing my book to the FBI's attention.

That's right -- I neglected to tell the FBI. Shame on me. Here's how that came up. Pasciuto's lawyer, in an effort to show that writing about the Wall Street Mob can be a public service, had told the judge about a letter that had been sent to BusinessWeek by former FBI Director Louis Freeh, praising my articles exposing the Mob. Prosecutors zeroed in on that. "At the time," their letter to Casey said, "Pasciuto and Weiss were successfully scheming to keep Born to Steal a secret from Director Freeh and everyone else at the FBI."


  Well, I'll have to plead guilty to that. But if our "scheme" was "successful," that would come as a surprise to the Publicity Dept. of Warner Books. Freeh wrote his very flattering letter to BusinessWeek in November, 2000, three months after the book received coverage from coast to coast, in Publishers Weekly, the front page of Variety, and the New York newspapers.

The letter, which prosecutors wrote to U.S. District Court Judge Richard C. Casey, had its intended effect. It was so vitriolic that the judge expressed wonderment that it was written at all, given the "gross fraud" so helpfully outlined by the government in its letter. But in a brief conversation that we had after the sentencing, Pasciuto wasn't at all surprised that the government had "rewarded" him in this manner. After all, the same people had tossed him in jail with gangsters "for his own protection." The U.S. Attorney's office declined to comment for this story.

I look at it this way: The public needs cooperating witnesses as much as the government does, if we're to learn about the inner workings of sophisticated criminal enterprises, stock fraud, and organized crime. In the future, cooperators who want to tell their stories will have to wait until they're out of the clutches of the government, lest they be punished as Pasciuto was.

That can take years. They'll wait and wait until they're safe from government retribution, their information growing cold and stale, slowly but surely becoming devoid of any public interest. That may not matter to the U.S. government. But it should mean a great deal to everyone else.

Weiss is a senior writer for BusinessWeek in New York

Edited by Douglas Harbrecht