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Profiting From Demise: Steve Cohen, Millennium Management, and Dendreon

By Mark Mitchell, Published: July 9th, 2009 11:55 AM CDT

D.H. Blair, the Mafia-affiliated brokerage founded by Lindsay Rosenwald’s father-in-law (the so-called “king of stock fraud”) and managed for some time by Rosenwald and Michael Milken’s former national sales manager, received much of its finance from the family of a man named Zev Wolfson. Mr. Wolfson was also closely involved with another Mafia-affiliated brokerage, A.R. Baron.

As you will recall, D.H. Blair and A.R. Baron featured prominently in the prosecution’s case against White Rock Partners, the firm that was co-founded by Felix Sater and Salvatore Lauria. Felix Sater, remember, is the alleged son of a top Russian Mob boss. Lauria previously worked as a trader for Gruntal & Company, a Mafia-affiliated brokerage that was stacked with cronies of Michael Milken.

You will remember that Sater, the fellow alleged to have blood ties to the Russian Mafia, is currently a business partner of Milken crony Leon Black. You will also recall that Sater is allegedly the man who sent a message that the Mafia would murder Deep Capture reporter Patrick Byrne if he continued his crusade against illegal naked short selling. And Sater is the same guy whose naked short selling colleague, Alain Chalem, had his ears and face shredded with bullets.

Wolfson, meanwhile, was involved in another “colorful” brokerage, Pond Equities. In 2006, the SEC filed civil charges accusing Pond Equities of participating in a massive naked short selling fraud.

Aside from funding Mafia-affiliated brokerages, some of which were closely tied to Michael Milken, Wolfson was also the key early investor in funds controlled by a number of Milken’s more “prominent” cronies.  For example, Wolfson was an early benefactor of a “prominent billionaire” named Saul Steinberg.

In the 1980s, Steinberg built a company called Reliance Insurance with generous junk bond financing from Milken. Reliance, in turn, became one of the Milken-aligned financial conglomerates that regularly bought the junk bonds that Milken was selling for his other cronies. In other words, Steinberg was a key player in Milken’s junk bond merry-go-round – one of history’s great Ponzi schemes. Eventually, Steinberg looted and bankrupted Reliance, though he has never been charged with any crime.

Today, Steinberg is a founding partner of Wisdom Tree Investments, which is managed by Steinberg’s son, Jono. Jono is married to CNBC’s Maria Bartiromo, also known as the “Money Honey.” The Money Honey’s father is the former owner of a Brooklyn catering outfit and private club called the Rex Manor. Residents of Brooklyn know the Rex Manor as a popular hang-out for members of the Bonanno organized crime family (a fact that is merely of biographical interest and not meant to imply that Mr. Bartiromo is tied to the Mob).

The other founding partner of Wisdom Tree Investments is Michael Steinhardt, who is one of the nation’s most “prominent” hedge fund managers. As was noted in Chapter 3, Steinhardt’s father, Sol “Red” Steinhardt, worked for the Genovese organized crime family and spent a number of years in Sing-Sing prison after a New York prosecutor pegged him as “the biggest Mafia fence in America.” According to Steinhardt himself, the key limited partners in Steinhardt Jr.’s first hedge fund were the Genovese Mafia and three “prominent investors” – Marty Peretz, Marc Rich, and Ivan Boesky.

Ivan Boesky, we know, was famously indicted in the 1980s for participating in various stock manipulation schemes with Michael Milken. Also convicted for his participation in these schemes was a man named John Mulheren, who had run an arbitrage fund largely financed by Zev Wolfson (the fellow who also financed Saul Steinberg, the Mafia-affiliated brokerages tied to Milken, and other Milken cronies who will be introduced shortly).

Although Mulheren’s conviction for manipulating stocks was ultimately reversed on appeal, there was a time when he believed that Boesky might squeal on him and his friend, Michael Milken. So one day Mulheren loaded his car with weaponry and set out to assassinate Boesky. Fortunately, the police arrested Mulheren before he could commit the murder.

According to a famous book called “Den of Thieves,” written by Pulitzer Prize winning author James Stewart, Mulheren spent most of his time in jail conversing with Anthony “Fat Tony” Salerno, who was then the top boss of the Genovese Mafia family. In addition, Scotland Yard has linked Salerno to Steven Wynn, a Las Vegas casino operator. Wynn’s wife, Elaine, sits on the board of Michael Milken’s Prostate Cancer Foundation. Steven Wynn is Milken’s closest friend, according to Milken.

After he got out of jail, Mulheren co-founded a hedge fund called Millennium Partners, then promptly died of an early heart attack, leaving his co-founder, Izzy Englander, to continue operating the fund. Izzy Englander secured much of his investment capital from not just Zev Wolfson, but also the Belzberg brothers – William, Sam, and Hymie. Executives at an investment firm called the Bache Group, citing U.S. Customs Service reports, once accused the Belzberg’s of having ties to organized crime.

As we know, only ten hedge funds on the planet owned large numbers of Dendreon put options at the end of March 2007, right after Dendreon received the fantastic news that the FDA’s advisory panel had voted that the company’s treatment for prostate cancer should be approved. In other words, after Dendreon received its fantastic news only ten hedge funds were maintaining long-shot bets against Dendreon (long-shot bets that would, in time, prove strangely prescient). At least seven of those hedge funds are quite “colorful” – and all seven are part of the same network.

So far we have discussed two of the seven “colorful” fund managers who stood to profit from the demise of Dendreon. Those two are Bernie Madoff, the $50 billion Ponzi schemer and naked short seller, and Lindsay Rosenwald, formerly a manager of the Wolfson-financed D.H. Blair, which was founded by Rosenwald’s father-in-law (the “king of stock fraud”). Both D.H. Blair and Madoff had ties to organized crime. Both worked intimately with Michael Milken or his closest associates.

So perhaps it is no surprise that the third hedge fund that was betting heavily against Dendreon in March 2007 was Millennium Management, co-founded by John Mulheren–jailhouse confidante of “Fat Tony” Salerno (the Genovese Mafia boss); co-conspirator of Michael Milken; would-be murderer of Ivan Boesky; and recipient, like other Milken cronies and a number of Mafia-affiliated brokerages; of key finance from Zev Wolfson.

Altogether, Millennium owned put options on 800,000 shares of Dendreon at the end of March 2007 – just after the company’s prostate cancer treatment was endorsed by an FDA advisory panel; right at the time that Dendreon came under a blistering illegal naked short selling attack; and just before Dendreon was to experience some strange occurrences.

* * * * * * * *

Let us return to Zev Wolfson. As we know, Wolfson funded D.H. Blair, the Mafia-affiliated brokerage which became the target of a 173 count indictment, saw two vice chairmen please guilty to securities fraud, had a president (Richard Maio) who was once Michael Milken’s national sales manager, and had another vice chairman (the son-in-law of the “king of stock fraud”) who is now one of America’s biggest biotech traders and an adversary of Dendreon.

We also know that Wolfson was the key early investor in funds run by Milken cronies Saul Steinberg (partner of Michael Steinhardt, whose father worked for the Genovese family as the “biggest Mafia fence in America”) and John Mulheren, who spent his jail-time conversing with Genovese boss Anthony “Fat Tony” Salerno, and then co-founded Millennium Management, which later also became an adversary of Dendreon.

In addition, Wolfson was a key early investor in a fund managed by “prominent billionaire” Carl Icahn.

Before he became a “prominent” billionaire, Icahn, remember, founded the options trading department at a firm called Gruntal & Company, which owed its existence to the generous finance that the criminal and future “philanthropist” Michael Milken gave to its parent company, the Home Group. Like Steinberg’s Reliance Insurance, the Home Group was a key player in Milken’s junk bond Ponzi scheme.

As mentioned, Icahn was replaced at Gruntal by Milken crony Ron Aizer, who proceeded to hire as traders two associates of Michael Milken. According to a reliable source, one of those traders was investigated for trading on inside information provided by Milken’s operation at Drexel Burnham Lambert. Both traders are now “prominent” hedge fund managers, and both are important characters in the story of Dendreon, so I will return to them soon.

As also mentioned, Gruntal was caught embezzling millions of dollars. One of its traders was found to be running money for the Gambino Mafia family. And a large number of its traders went on to work for White Rock Partners, the Mafia firm that was indicted for manipulating stocks with help from the Mafia-affiliated D.H. Blair, founded by the father-in-law of Lindsay Rosenwald, who was one of those seven “colorful” hedge fund managers who stood to profit from the demise of Dendreon.

Recall that White Rock also did business with the naked short seller Alain Chalem. Recall also that White Rock’s co-founder Salvatore Lauria has said that he once worried that White Rock’s other co-founder, Felix Sater, might murder Chalem. As we know, Chalem eventually was assassinated in his New Jersey mansion (which does not, of course, prove that Lauria’s fears were correct).

When Icahn left Gruntal, he began a career in “greenmailing” – acquiring large amounts of companies’ stock and threatening to make problems if the companies didn’t buy back the stock at a premium. His greenmailing (a.k.a. blackmailing) exploits were made possible by generous junk bond finance handed to him by Michael Milken. By most accounts, Icahn owes his phenomenal wealth and power to two people – Zev Wolfson (financier to multiple Mafia-affiliated brokerages) and Michael Milken, who is (as should be clear by this point) on close terms with many Mafia-connected investors, and is now considered a “prominent philanthropist.”

Given his association with Milken and Wolfson, it is perhaps predictable that Icahn has relationships with other Mafia-connected goons as well. For example, Icahn once employed a man named Allen Barry Witz, who was later implicated by the U.S. government in a Mafia-run stock manipulation fraud. As it happens, Witz also did business with Alain Chalem, the Mafia-connected naked short seller who was assassinated in New Jersey – his head, face and ears filled with bullets.

According to various reports, Icahn’s former employee, Barry Witz, was one of the last people, other than the killers, to see Chalem alive.

* * * * * * * *

Milken crony Carl Icahn has had multiple brushes with naked short selling. For example, Icahn was the man behind Ladenburg Thalmann, an investment bank that financed many companies through so-called PIPEs – private investments in public equities.

The PIPEs industry is rife with abuse (See Forbes magazine’s story, “Sewer PIPEs,” which describes some of the industry’s ties to the Mafia).  Since PIPEs dilute equity, a company that does a PIPEs deal will typically see its stock fall in value. To capitalize on this, hedge funds affiliated with the PIPEs investor (i.e. with the company’s supposed benefactor) will sometimes illegally naked short the company before and after the PIPEs deal is announced.  Often, this naked short selling sends the stock into a “death spiral,” and the company is put out of business.

In one famous case, Icahn’s Ladenburg Thalmann was hired to broker a PIPEs deal for a small software firm called Sedona Corporation. In this capacity, Ladenburg introduced Sedona to a hedge fund called Rhino Advisors, which in turn brought in a hedge fund called AMRO International. According to prosecutors who later charged Rhino with stock manipulation, as soon as AMRO and Sedona entered into their PIPEs deal, Rhino’s owner Andreas Badian, instructed his traders to naked short Sedona with “unbridled aggression.” Rhino’s other owner, Thomas Badian, is now a fugitive from the law living in Austria.

According to the SEC, Rhino’s naked short selling was conducted in collaboration with Pond Equities (also known as Pond Securities), which was financed by Zev Wolfson, the fellow who also financed all those Milken cronies, including Icahn and the folks at the Mafia-affiliated D.H. Blair.

Most of Rhino’s phantom stock was processed through a giant brokerage called Refco Securities, which was later found to be hiding more than $400 million worth of liabilities in off-balance sheet entities. As Deep Capture reporter Judd Bagley detailed in a recent video (click here to watch), those liabilities were likely related to Refco’s rampant naked short selling.

In a series of stories for The Deal, a financial news magazine, reporter Stacy Mosher determined that Amro International had provided PIPEs financing to over sixty companies, many of them biotech firms. At least 29 of those deals involved Carl Icahn’s Ladenburg Thalmann. Soon after announcing their PIPEs deals, every one of those 29 companies were hit with unbridled naked short selling. Every one of those 29 companies saw their stocks go into “death spirals.” And nearly every one of them quickly went out of business.

Icahn is not the most famous player in the world of PIPEs. That accolade belongs to another of Milken and Wolfson’s charges — Lindsay Rosenwald, one of those seven “colorful” hedge fund managers who stood to profit from the demise of Dendreon.

Rosenwald worked for Ladenberg Thalmann before joining his father-in-law (the “king of stock fraud”) at D.H. Blair, the Mafia-affiliated brokerage whose president was Michael Milken’s former national sales manager. In addition to financing medical companies with no medicines, Rosenwald’s Paramount Capital has done some PIPEs deals with companies that did, indeed, have promising medicines. Many of those companies are now gone — drowned by tsunamis of phantom stock.

* * * * * * * *

As mentioned, Carl Icahn, who would later owe his status as a billionaire to Michael Milken, founded the options department at Gruntal & Company, which owed its existence to Michael Milken.  When Icahn left Gruntal, he was replaced by Milken crony Ron Aizer, who proceeded to hire two traders who are cronies of Michael Milken.

The first trader hired at Gruntal by Aizer was a man named Steve Cohen, who later founded a hedge fund called SAC Capital. Cohen has been described (by BusinessWeek magazine and others) as “the most powerful trader on Wall Street.”

In an upcoming chapter, I’ll name the second trader hired by Aizer. Soon after that trader was hired, Cohen was joined at Gruntal by Stephen Feinberg, who had previously been a top trader for Milken’s operation at Drexel Burnham, and now runs Cerberus Capital Management, which was, until recently, co-owned by J. Ezra Merkin, one of the  most important “feeders” to Bernard Madoff’s Mafia-connected $50 billion Ponzi scheme.

While at Gruntal, Cohen grew closer to Milken, and came to be on especially good terms with one of Milken’s top employees, Bruce Newberg, who was later implicated in Milken’s stock manipulation schemes. A reliable source has told Deep Capture that the SEC once investigated Cohen for allegedly trading on inside information provided to him by Milken’s staff at Drexel, Burnham, Lambert.

Nowadays, Cohen is known for demanding strict loyalty from his co-workers, past and present. Some say that these demands border on paranoia (Cohen’s employees are required to sign non-disclosure agreements swearing them to absolute secrecy – for a lifetime), but many of Cohen’s colleagues have benefited. Cohen’s former employees often move to new hedge funds that are in actuality satellites of Cohen’s powerful trading empire.

Sometimes the hedge funds that are staffed by Cohen’s former employees are initially or wholly financed by Cohen himself. Other times Cohen and the hedge funds staffed by his former employees merely trade in the same stocks. It is fair to assume that, collectively, Cohen, his former employees, and others in his network (traders who are tied to Michael Milken or his close associates) have enough fire power to move share prices.

In the 1990s, Cohen’s SAC Capital sometimes bought stocks that were being promoted by D.H. Blair, the Mafia-affiliated brokerage that figured prominently in the prosecution’s case against White Rock Partners, whose traders were mostly Cohen’s former co-workers at Gruntal. Cohen would hold these D.H. Blair stocks even when they had no revenues and had been delisted from stock exchanges. Generally, these kinds of stocks were held by only two sorts of investors – little old ladies who’d been bamboozled by D.H. Blair, and stock manipulators. But who knows, maybe Cohen did the math and figured they were the next big things.

At any rate, Cohen seems to have had some sort of relationship with the Mafia-affiliated D.H. Blair. But D.H. Blair is gone. In its place, we have Paramount Capital, run by Lindsay Rosenwald, the son-in-law of the “fraud king” who founded D.H. Blair.

One employee of Paramount Capital was Joseph Edelman, who, remember, was simultaneously running one of the seven “colorful” hedge funds that was betting big against Dendreon. Meanwhile, Rosenwald was the controlling shareholder in Cougar Biotechnology, which claimed to have a promising treatment for prostate cancer, though that treatment was (and is) largely untested and years away from recieving FDA approval.

In future chapters, we will begin to ask why Michael Milken’s “philanthropic” outfit, the Prostate Cancer Foundation, went to lengths to promote Milken crony Rosenwald’s untested prostate cancer treatment while seeming to dismiss (and perhaps even seeking to derail) Dendreon, whose treatment had received the overwhelming endorsement of an FDA expert advisory panel and was capable (if it had not been derailed) of saving patients’ lives right away.

Another employee of Rosenwald’s Paramount Capital was a man named David J. Kellman. Mr. Kellman was Paramount Capital’s vice president. Prior to becoming the vice president of Paramount Capital, the hedge fund owned by Lindsay Rosenwald, formerly of the Mafia-connected D.H. Blair, Kellman was a top trader for Steve Cohen’s SAC Capital.

I assume that Steven Cohen has been as diligent about maintaining his relationship with Kellman as he has been with all his former employees (a diligence that some describe as “maniacal”). Presumably Cohen also stays in touch with the folks at Millennium Management, the fund that was co-founded by the fellow who sought to assassinate Ivan Boesky, and later became one of the seven “colorful” hedge funds that owned large numbers of put options in Dendreon.

Over the years, Millennium has employed a number of Cohen’s former traders, including Edmund Debler and Steve Lisi, who ran Millennium’s healthcare trading until 2005, when they set up their own fund, which no doubt served as another satellite of the Cohen empire.

Millennium is a highly secretive fund, so it is difficult to know which of its employees were responsible for its Dendreon trades, but perhaps its current healthcare team, like its previous one, are colleagues of  Mr. Cohen. We do know that Millennium has hired a new vice president. His name is Hanming Rao. And he was previously a top trader for Cohen’s SAC Capital.

Millennium, Paramount, Steve Cohen and others in this network often take similar positions in the same stocks. Many of those stocks have been pummeled by illegal naked short selling.

But I do not know if this has anything to do with Cohen being the fourth of those seven “colorful” hedge fund managers who happened to have the foresight to hold large numbers of put options in Dendreon at the end of March, 2007, right at the time when Dendreon was hit with an unprecedented wave of illegal naked short selling (phantom stock).

Who was responsible for the illegal naked short selling? We don’t know. The SEC keeps that a big secret — “proprietary trading strategies.”

* * * * * * * *

But, to summarize, only ten hedge funds on the planet owned large numbers of Dendreon put options (bets against the company) at the end of March 2007–which was right after the FDA’s advisory panel had endorsed Dendreon’s treatment for prostate cancer; right at the time that the company was hit with waves of illegal naked short selling, and just before a series of strange occurrences (which I will describe in due course) conspired to derail Dendreon’s promising treatment for prostate cancer.

At least seven of those ten hedge fund managers are part of the same “colorful” network.

The first of the seven “colorful” hedge fund managers was Bernard Madoff, who orchestrated a $50 billion Ponzi scheme with considerable help from close associates of the Mafia and Michael Milken while authoring an SEC naked short selling loophole that enabled hedge funds to obtain “married puts” — those phantom stock “bullets” that unscrupulous hedge funds use to drive down prices and destroy public companies.

The second “colorful” hedge fund manager worked for Paramount Capital, owned by Lindsay Rosenwald, the Milken crony who once helped run the Mafia-affiliated D.H. Blair, which was founded by Rosenwald’s father-in-law (the “king of stock fraud”). D.H. Blair’s president was Michael Milken’s former national sales manager. D.H. Blair was also tied by federal prosecutors to the Mafia-run White Rock Capital, whose co-founder and top traders came from Gruntal, a brokerage that had ties to the Mafia and was stacked with Milken cronies, including Steve Cohen. In later years, D.H. Blair seems to have had a trading relationship with Steve Cohen. Then D.H. Blair was indicted on 173 counts of securities fraud, by which point Lindsay Rosenwald had founded Paramount Capital, where one of Steve Cohen’s top traders served as vice president.

The third colorful hedge fund was Millennium Capital, which was co-founded by John Mulheren, who was convicted for manipulating stocks with Michael Milken and once attempted to assassinate Milken’s famous co-conspirator Ivan Boesky. Millennium has employed a number of Steve Cohen’s former top traders, including Hanming Rao, who currently serves as Millenniums’ vice president.

And the fourth of seven “colorful” hedge fund managers who had the foresight to bet big against Dendreon–right when there was every reason to be optimistic about Dendreon, and right before some strange occurrences derailed the company–was Steve Cohen, who (we are told) once faced an SEC investigation into allegations that he traded on inside information provided to him by Michael Milken’s operation at Drexel Burnham Lambert, and is reportedly maniacal about maintaining relationships with former colleagues tied to Michael Milken, and with former employees, such as those who have worked as vice presidents of Paramount Capital and Millennium Management.

Cohen’s lesser known hedge fund, Sigma Capital, held put options on 750,000 shares of Dendreon at the end of March 2007. Another of Cohen’s lesser known hedge funds, JL Advisors, owned 1.3 million shares of Dendreon as of the end of 2006. These shares were dumped sometime before March 31, 2007, contributing to the selling volume that would be created by Paramount Capital employee Joseph Edelman dumping more than 6 million Dendreon shares that he’d recieved by exercising call options  — and by the simultaneous appearance in the marketplace of at least 9 million more phantom shares, the result of rampant naked short selling which the SEC decries as illegal, but refuses to address.

* * * * * * * *

This is part 4 of a 15-part series. The remaining installments will appear on Deep Capture over the next several weeks, after which point the story will be published in its entirety at It is a story about the travails of just one small company, but it describes market machinations that have affected hundreds of other companies, and it contains a larger message for anyone concerned about the “deep capture” of our nation’s media and regulatory bodies.

Mark Mitchell is a reporter for He previously worked as an editorial page writer for The Wall Street Journal in Europe, a business correspondent for Time magazine in Asia, and as an assistant managing editor responsible for the Columbia Journalism Review’s online critique of business journalism. He holds an MBA from the Kellogg Graduate School of Management at Northwestern University. Email:


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