John Thomas Financial: The Other Side of Wall Street
Nicholas Gwiazda thought he’d found a door into the glamorous world of Wall Street in September when he answered a Craigslist ad from John Thomas Financial, which was looking for junior brokers. A couple of days later he was invited to tour the firm’s marble-floored offices, across the street from the New York Stock Exchange. The 24-year-old University of Connecticut graduate says he was told he could make hundreds of thousands of dollars a year after passing licensing exams. On his first day on the job, Gwiazda was handed a phone and told to call strangers across the country, advising them that a senior broker would follow up in a week with a good investing idea. He and other trainees worked 14-hour days, mostly on their feet, reciting memorized sales pitches. The pay was $300 a week. Gwiazda says he was fired after three months. “It was a glorified call center, honestly,” he says.
John Thomas has generated more than $100 million in revenue in the five years since it was started by Anastasios “Tommy” Belesis. During that time, Belesis has made television appearances; received endorsements from celebrities, including former New York Mayor Rudolph Giuliani; and played a banker in the 2010 movie Wall Street: Money Never Sleeps. (Actor Shia LaBeouf told the Today Show’s Matt Lauer that he trained for his role in the film by spending time with John Thomas traders.)
Now Belesis is attracting unwanted attention. The Financial Industry Regulatory Authority told him in January that he may face disciplinary action for artificially inflating the price of a stock, according to regulatory records. The New York Post reported on Feb. 7 that the FBI has interviewed ex-employees. “There is not a shred of evidence that suggests there is an ongoing inquiry by the FBI,” says Robert Bursky, the firm’s lawyer. “In the brokerage industry, basically every broker-dealer, every day, is under constant regulatory scrutiny.” Belesis declined to comment, as did spokesmen for the FBI and Finra.
In interviews, Gwiazda and 19 other former John Thomas employees described a boiler-room atmosphere where they used high-pressure tactics to push stocks. Most of the former employees asked for anonymity to safeguard their job prospects or because they feared retribution.
John Thomas’s 40,000-square-foot offices on the 23rd floor of 14 Wall St., the former headquarters of Bankers Trust, are decorated with a statue of a bull, big-screen televisions, and a vending machine stocked solely with Red Bull. Brokers rub the bull for luck as they walk in at 7:30 a.m. and begin the day by practicing their pitches on one another while speakers blast the soundtrack from Rocky. Everyone wears suits; men who show up with stubble are dispatched to the bathroom, where a bow-tied attendant dispenses razors, cologne, and candy. Before they hit the phones, Belesis, bald and muscular, sometimes energizes his troops with speeches about how they’re entering a “war zone.” Walking the floor, he pats employees on the back and calls them “buddy.”
Working from printed lists or index cards, junior brokers can log 500 calls a day hunting for customers. They don’t have computers and are not allowed to sit. Standing makes them sound more animated and their pitches more compelling, or so their bosses say. Senior brokers shout, curse, or chat about weight lifting, cars, and watches. “John Thomas might have been a little bit too aggressive, but it worked,” says George Katcharava, a broker who says he worked for the firm about three years ago. “You know how hard it is to cold-call?”
“Don’t pitch the b––––,” was one instruction new recruits often received from their bosses, say three former employees. The line comes from the 2000 movie Boiler Room, which one ex-employee says was screened at the office. Junior brokers also were told to avoid people whose names sounded as if they were black, Latino, or Muslim, because they were apt to be too poor to invest. Bursky, the lawyer, disputes those accounts.
David Pitts, a John Thomas spokesman at public relations firm Argot Partners, says the brokerage isn’t a boiler room. It helps real companies raise money and provides honest advice to investors, he says. Bursky adds that brokers are, in fact, allowed to sit. Wayne Kaufman, John Thomas’s chief market strategist, says there’s nothing wrong with cold-calling. “Every sales organization has salespeople of different calibers,” he says. “I’m sure that there are brokers at every firm that’s ever existed, including Goldman Sachs, that are fast talkers or seem like used-car salesmen.”
Richard Remington, a Stockton (Calif.) contractor, says he got a call in December 2008 from his broker, who’d moved to John Thomas two months earlier. “He said John Thomas was this great firm right there on Wall Street, right in the pulse of everything going on,” Remington says. The salesman, Omar “Mark” Hassan, told him to invest his entire portfolio in America West Resources, according to Remington. The coal company was also an investment banking client of the firm. It paid John Thomas more than $1 million in commissions in 2011 and gave the firm warrants to buy 200,000 shares at $1 a share, the coal company said in an SEC filing in November of that year. The pitch “starts off calm, and the intensity of the call builds,” Remington recalls. “Next thing you know, you’ve got three guys talking at you on the phone at the same time.” Remington ended up losing about $150,000, according to his attorney, Sara Hanley of Asheville, N.C., who’s representing him in an arbitration claim against Hassan and John Thomas. Hassan and the firm deny all the allegations in the case, Bursky says.
Two former John Thomas employees say Finra investigators have questioned them about the firm’s trading of America West stock on Feb. 23, 2012. On that day, the stock spiked from 29¢ to as high as $1.80. John Thomas brokers told customers they couldn’t sell their shares because they hadn’t filled out the proper paperwork, according to the two ex-brokers. The stock fell to 65¢ the next day. Kaufman says he wasn’t in the office that day. “I think this is a case of a small business that was growing at hyperspeed that couldn’t handle the growth,” he says, referring to John Thomas. “The guy in charge would be the first to admit it, but that does not make him a crook.”
That guy is a college dropout who got his start in finance at 21 when he took a job at Lew Lieberbaum, a defunct Long Island brokerage that Finra sanctioned for manipulating stock prices, regulatory records show. (Belesis was not implicated.) After working at S.W. Bach and Joseph Gunnar with his two brothers, Belesis started John Thomas in 2007, naming the firm after his grandparents, according to Pitts. Finra records show Belesis owns at least 75 percent of John Thomas, which has reaped about $108 million in commissions and fees since its founding. Revenue was $22.3 million for the 12 months ended May 31, a 26 percent drop from a year earlier, according to SEC filings.
Brokers have been using high-pressure tactics to sell stocks over the phone for decades, with some boiler rooms crossing the line into fraud. Stratton Oakmont was among the most notorious: Federal prosecutors said the brokerage generated millions in illicit profits by pushing penny stocks and manipulating their prices from its offices on Long Island before it was shut down by regulators in 1996. That was “the height of the penny-stock Long Island craze,” says Danny Porush, one of Stratton’s founders, who served about three years in prison for securities fraud. “Things are going to be much tougher now when someone mentions a stock and two clicks away you can find out everything.”