On Feb. 25, stockbroker Michael Cohen was at his synagogue when his cell phone rang.
It was a client, Youssef Fakih of Brooklyn, and he was angry.
Fakih and his brother Ali had lost hundreds of thousands of dollars since opening an account with Cohen.
Now he was prepared to confront the broker with the shocking allegation that Cohen deliberately made bad trades because Fakih is an Arab.
"I heard that ... you lost my money and ... you lost it purposely," said Fakih, who was secretly taping the call. "Why is that?"
"Well, all I can say to you is that you lied to me about a couple of things," Cohen said, according to a transcript. "You told me you were Jewish."
Taped conversations
Fakih and his brother have filed a $36 million claim - charging the broker deliberately sabotaged their account because they are Arab.
And they say they have proof in hours of taped conversations between Cohen and two Jewish brothers who posed as investors to help the Fakihs.
On the tapes, Cohen allegedly admitted deliberately losing the Fakihs' money, described how he did it and disparaged Arabs by calling them "sand n------."
"He was an Arab, okay?" Cohen says on one of the tapes when asked why he lost so much of Youssef Fakih's money.
The suit seeks damages from Cohen; Gruntal, the brokerage firm he worked for, and Ryan Beck & Co., which bought Gruntal's assets last spring.
"It's an economic hate crime," said the Fakihs' lawyer, Stuart Meissner.
"I not only feel cheated, I am very angry he did this based on my religion," Youssef Fakih told the Daily News.
State probe mulled
State Attorney General Eliot Spitzer also was reviewing the case for possible criminal wrongdoing, according to a spokesman.
Cohen's lawyer denied the allegations and accused the Fakihs of using the World Trade Center tragedy to advance their claim.
The brothers' complaint was made to the National Association of Security Dealers, which will arbitrate the dispute.
Youssef and Ali - who were loaned $600,000 by their brothers in Beirut - charge Cohen made transactions without their approval, and the losses started piling up.
Hate talk
Later, the friend who brought the Fakihs to Cohen heard the broker talking about hating Arabs and informed Youssef, Meissner said.
The Fakihs hatched a plan to outfit brothers Israel and Lazer Markowitz with recorders - telling Cohen they had $3 million to invest.
In one of the tapes, Cohen said he "purposely" sold short on stocks owned by the Fakihs that he knew were going up in price.
"When you short a good stock and it goes up, you lose money," Cohen explained.
Blames client
Cohen could not be reached for comment. He has filed a $30 million counterclaim charging he was the victim of a setup.
His lawyer, David Foster, blamed Youssef Fakih for the losses.
"Any losses Youssef suffered were at his own direction, with his knowledge and consent," Foster said.
He said the Fakihs told Cohen the Markowitz brothers would more likely invest with him if he made anti-Arab comments. "He said some things that he thought it was what they wanted to hear, but they are not his beliefs at all," Foster said.
A hearing is scheduled for Sept. 4 in Brooklyn Federal Court to determine whether Ryan Beck is liable for Cohen's alleged actions while employed by Gruntal.
The broker left the firm in June.
On the Record
Excerpt from Nov. 1 conversation between Michael Cohen and Israel Markowitz, a Jewish friend of the Fakih brothers who was posing as a wealthy investor.
COHEN: So this guy calls me up and he says he goes 'Hello, I want to open up an account with you.' ... I says, 'Where are you from?' He says 'I'm from Egypt.' I said, 'Are you a Christian?' He says, 'No I'm Muslim.' 'Well listen,' I says, 'I don't desire to do business with you.' ... I says 'You -- blew up my -- building in front of me.' ...
MARKOWITZ: You don't have any Arabs working there?
COHEN: Oh no, no. They're too stupid. They're sand n _ _ _ _ _ _.
***
Excerpt of Nov. 7 conversation between Cohen and Markowitz.
MARKOWITZ: ... why [did] you lose money for Youssef. ... It bothers me if I'm going to give you $3 million.
COHEN: He's a -- Arab. Okay.
MARKOWITZ: That's why you did it?
COHEN: He's a -- Arab. ... Now you know the truth, all right.
***
Excerpt of Feb. 17 conversation between Cohen and Markowitz.
MARKOWITZ: So now the truth. Did you lose the money because the market was bad or you didn't know what you were doing or you did it, uh, purposely?
COHEN: No, he lost it because, uh, it was purposely.
MARKOWITZ: Fine. Okay, clarify with me. Explain to me one thing. ... How did you lose $400,000 purposely?
COHEN: Shorting. Selling short. ... When you short a good stock and it goes up, you lose money.
***
Excerpt of Feb. 25 conversation between Cohen and Youssef Fakih.
YOUSSEF: ... I heard that, you know, you lost me money and, uh, you lost it purposely. Why is that?
COHEN: Well, all I can tell you is that you lied to me about a couple of things. You told me you were Jewish.
***
Excerpt of conversation Feb. 26 between Cohen and Fakih
FAKIH: So in other words, if I was Jewish, you wouldn't lose me the money?
COHEN: Listen, you are what you are and I'm going to leave it at that. ... And quite frankly, the fact that you lost money, I really don't care, okay. ... I'm totally clean and no one's going to believe anything you have to say.