By Dan Christensen, BrowardBulldog.org
Two years after federal arbitrators found he had fleeced millions of dollars from clients with whom he once worshipped, disgraced South Florida stockbroker Gary Jay Gross was among 15 defendants charged last week in a large bank fraud scheme.
Gross, notorious for being the subject of one of the largest securities arbitration awards ever handed down against an individual, now faces up to 30 years in prison and a $1 million fine if convicted of criminal conspiracy.
The FBI’s arrest of Gross has stirred mixed emotions among the client-victims he wiped out, including those he recruited as investors while attending synagogue at the Chabad of West Boca Raton.
“My clients are pissed off and happy at the same time,” said Boca Raton securities lawyer James Sallah. “Gross took out Holocaust survivors, old widows and retirees. We talked to the FBI back then and sent them lots of documentation, but we couldn’t get them interested. Now, lo and behold, he rips off a bank and he gets indicted.”
Scott Silver, a Coral Springs stock lawyer who works with Sallah, called Gross “the most notorious investment fraud recidivist in South Florida in the past 20 years.”
“What all my clients keep asking me is, “How does this man still live in a multi-million dollar mansion in Boca Raton?” said Silver.
Gross, 59, and his wife Teddie, live in a six-bedroom, 6 ½-bedroom “courtyard estate” in a gated enclave of Boca Raton’s exclusive Polo Club. The couple listed their 10,000 square foot home for sale for $3.8 million a few years ago, but took it off the market as home values declined. You can see the prior listing, with a photo gallery, video and full description, here.
The bank fraud that has catapulted Gross into the public eye once again was a four-year scheme to defraud 10 area banks out of more than $10 million, according to U.S. Attorney Wilfredo A. Ferrer. He described it as “a new twist” on mortgage fraud with bogus applications for small business loans and lines of credit that were approved by corrupt bankers.
$10 million bank fraud
Authorities said the investigation focused on Frank Santa, 51, a Boca Raton loan broker whose Palm Beach Business Consultants secured loans for small businesses “that could not legitimately qualify for financing.” Santa, who bribed bankers to approve the loans, raked off up-front finder’s fees of $12,500 to $25,000, they said.
Seven bank officers and seven customers of Santa’s company – including Gross – also were charged. Those customers included Thomas Correa, a former Broward Sheriff’s reserve officer and an assistant principal at the Lanier-James Education Center in Hallandale Beach, and Jeanne Ward, an ex-BSO investigative analyst.
The corrupt bankers worked at Wachovia, HSBC, Floridian Community Bank, Fifth Third Bank, Bank of America, Amtrust and Regions Bank, authorities said.
Nine others were charged as part of the FBI undercover investigation last summer, Ferrer said.
Gross was charged by information with stealing $213,000 from Wachovia and Regions Bank by obtaining lines of credit for which he didn’t qualify. The use of an information, instead of an indictment, to charge someone often signals that a defendant is cooperating.
Gross was released on a $50,000 surety bond. Court records do not list an attorney for him.
In February 2008, The Miami Herald reported how Florida regulators failed to prevent Gross from preying upon the elderly and the infirm despite a trail of red flags. The case prompted the state Division of Securities to significantly tighten its scrutiny of stockbrokers, according to industry lawyers.
Gross has a long record – more than 100 pages – of disputes with customers and state and federal regulators, according to the Financial Industry Regulatory Authority. Again and again, they said, Gross would put their money into risky investments – like penny stocks – that paid big commissions.
One of Gross’s customers at Boca Raton’s Axiom Capital Management, who became a creditor when Gross filed for bankruptcy in 2007, was actor Henry “The Fonz” Winkler of television’s Happy Days. The court later denied Gross a discharge of his debts.
The most serious complaints against Gross began in 2002 when customers reported that he was putting their money in unsuitable investments against their wishes, and then lying about losses.
More than 100 of Gross’s clients suffered sizeable losses because of various illegalities. Some, like Henry Drabin, who survived the Nazis at Buchenwald, and his wife Rosalind, filed for FINRA arbitration. They were awarded $418,000 in November 2007.
The Securities and Exchange Commission banned Gross from the stock trading business in December 2008 as part of a settlement of civil charges brought in the wake of the Herald’s stories.
Then, in August 2009, FINRA arbitrators awarded $7.5 million to three-dozen other ex-clients in August 2009.
Millions owed, zero paid
Gross has yet to pay a penny, though various brokerage firms he worked for have paid out millions, said attorney Sallah.
The criminal information against Gross alleges that he was involved in the bank fraud scheme from August 2007 through August 2009.
But one of Gross’s many victims says Gross and Santa’s scheming goes back to at least December 2006.
Joan Ezersky, 78, is a retired Baltimore schoolteacher whose large losses at Gross’s hands forced her to sell her south Palm home and move back to Baltimore. In an interview, she said that when she first confronted Gross by phone after learning that hundreds of thousands of dollars had been drained from her account he referred her to Santa to arrange a loan “while we get things straightened out.”
“Gary was on the ski slopes. I said I can’t wait until you get back. Where’s my money? He said I’m going to have a friend of mine in the mortgage business take care of you,” Ezersky said.
Frank Santa called a half hour later that Saturday, and drove over later to talk in a Mercedes convertible.
“He said he was going to take me to the bank on Monday morning. He said he knows the manager there who will work with me and set me up with some money to tide me over,” Ezersky said.
The loan Santa offered was for “$30,000 or $40,000.” He told her that “because your Gary’s good friend, I’ll cut my fee from $8,000 to $5,000.”
Ezersky, suspicious, didn’t borrow the money. Santa stopped calling.
“I was delighted to hear that Gary was arrested. I was thrilled,” said Ezersky. “When I heard Frank was arrested, too, it was even better.”