Investment CEO Charged With Fraud

An investment broker from Albany was arrested on federal criminal charges Monday for an alleged scheme involving more than 200 investors and $5.5 million.

Christopher W. Bass, 52, of Menands, was charged in a felony complaint with a single count of securities fraud in connection with his sale of allegedly fraudulent securities to investors across the country.

Bass, president and chief executive officer of Swiss Capital Harbor/USA, appeared before U.S. Magistrate Judge David R. Homer at the Federal Courthouse in Albany and was remanded to the custody of U.S. Marshals pending a detention hearing later this week. Numerous people who worked for Bass have not been charged, and at least one former employee cooperated with federal investigators, records show.

The firm, which also operated under the name Revisco Finanz AG, has hundreds of customers and has claimed ties to European banks. Many investors were told their money was being invested in overseas projects such as mobile power plants.

The criminal complaint that was unsealed Monday accuses Bass of using deception and fraud to promise investors high returns that federal authorities said were unreasonable.

Bank records reviewed by federal investigators show that Bass allegedly used $169,858 of investors’ deposits to finance the purchase of his upscale home in Menands, and that at least $700,000 of investors’ money was disbursed to Bass. Another $550,000 of investors’ deposits was used for payroll expenses at Swiss Capital Harbor, including $200,000 in gross pay to Bass and at least $50,000 to his family members, according to court records.

Also, the bank records showed that more than $1.25 million of investors’ deposits was used to repay investors who demanded to get their money back or income from their investments, which is indicative of a Ponzi-type scheme.

The Times Union first reported in October that Bass and his company were under federal investigation for possible fraud. Numerous investors who spoke to the newspaper said they were unable to get their money back from Bass.

Last August, the 39 N. Pearl St. offices of Swiss Capital Harbor/USA and the Park Hill Lane residence of Bass were raided by U.S. Customs agents.

Swiss Capital brochures and letters sent to clients obtained by the Times Union showed the company garnered possibly millions of dollars from investors who were told their money was being invested in European power plants through an overseas bank that may not exist.

A federal criminal complaint filed in U.S. District Court shows that investigators determined that between January 2007 and July 2009, more than 200 investors paid Bass “at least $5.5 million in the investment scheme.” Federal authorities said less than half the money collected was sent overseas.

Some investors said they lost their life’s savings in the alleged scheme.

Continued

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UPDATE: Ex-Money Manager Vilar Sentenced To 9 Years Prison For Fraud

Ex-money manager Alberto Vilar and his business partner Gary Tanaka were sentenced to prison terms Friday after they were convicted in 2008 of bilking investors out of millions of dollars.

At a hearing Friday, U.S. District Judge Richard J. Sullivan in Manhattan sentenced Vilar, one-time head of defunct Amerindo Investment Advisors, to nine years in prison, while ordering Tanaka, a one-time Amerindo director and officer, to serve five years in prison.

On Friday, the judge found the loss to victims who testified at trial was about $21.9 million.

“People need to be able to trust their financial adviser,” Sullivan said before imposing sentence.

Vilar, 69 years old, also was ordered to forfeit more than $22 million; to pay restitution of $21.9 million, plus interest; and to pay a fine of $25,000.

The judge said he expected to impose restitution and forfeiture against Tanaka, in the neighborhood of $20 million. Tanaka also was ordered to pay a $20,000 fine.

In November 2008, Vilar was convicted on securities fraud, mail fraud, wire fraud, investment-adviser fraud and money-laundering charges.

Vilar, who was subject to home confinement pending trial, was ordered detained in December 2008 and has been in custody since then.

At the time, Tanaka, 66, was convicted of conspiracy, securities fraud and investment-advisor fraud, but acquitted on nine other counts.

In a rambling statement in court Friday, Vilar defended the firm’s trading strategy and said that $48 million was available to cover about $20 million in claims from victims. As a result, he said he didn’t “intellectually understand” the loss amount alleged by prosecutors.

“I deeply regret any inconvenience our 14,000 clients may have suffered,” Vilar said. “Fortunately, there are only five victims. I’m 95% confident they will be paid and not suffer a loss.”

Prosecutors from the U.S. Attorney’s office in Manhattan had alleged that Vilar, a longtime opera patron, and Tanaka misappropriated client funds for personal expenses, charitable contributions and Amerindo’s operating expenses.

One of the victims was Lily Cates, the mother of actress Phoebe Cates.

The men, who were originally arrested in 2005, also had been accused by prosecutors of engaging in a scheme to defraud investors in so-called guaranteed fixed-rate deposit accounts, or GFRDAs.

During the hearing, Glenn Colton, Tanaka’s lawyer, argued that his client was different from Vilar, saying Tanaka traveled coach on airlines, while Vilar traveled first class. He described the crimes Tanaka was convicted of as an “aberration.”

“They’re different,” Colton said. “They did different things and, I submit, they should be treated different.”

Prosecutors said the men didn’t invest in short-term debt instruments as promised, discouraged investors from redeeming their investments and diverted money from other Amerindo clients to repay its obligations to GFRDA investors when those funds didn’t perform as promised.

“The last several years–from the age of 82 to 89–have been frightful years for me,” said Herbert Mayer, an 89-year-old retired surgeon and a victim of the scheme. He spoke during the hearing from a wheelchair.

Prosecutors said Mayer and his two daughters, who live in Yonkers, N.Y., suffered a loss of more than $11 million.

“They have robbed my family’s hard earned fortune,” said Debra Mayer, one of his daughters, in reference to Tanaka and Vilar.

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Former Mich. man charged in $2M investment scheme

GRAND RAPIDS, Mich. - A former Michigan man has been indicted on mail fraud, wire fraud and money laundering charges in what prosecutors say was a scheme to defraud hundreds of investors out of more than $2 million.

The U.S. attorney’s office in Grand Rapids announced Friday that 48-year-old Ty Allan Klotz was arrested Jan. 14 in Carbondale, Ill. The indictment charging the former Mason resident was unsealed earlier in the week.

A message seeking comment was left after regular business hours Friday with a public defender appointed to represent him in Illinois.

Prosecutors say Klotz was a handyman who started trading stocks and commodities for family and friends online in 2004. The indictment says that from 2004 to 2006 he falsely promised monthly returns of 20 percent.

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Be wary of a sales pitch over the phone

Greg was working his sales pitch hard, trying to touch on as many points as possible before I could cut him off or maybe hang up on him.

He was with a no-name brokerage firm based in Florida and was pushing an investment in silver, fast-talking his way through points ranging from inflation to the economy to the ability to use precious metals in retirement savings vehicles, when I finally stopped him.

“Really, Greg, who buys this stuff? Who are you hoping to find at home during the middle of the day that is going to say ‘Hey, broker-who-I’ve-never-heard-from-before, you are absolutely right! I need to rush out right now and get some silver!”

“Well,” he said, taken aback a bit by the question, “the people who buy it are the ones who feel like they need to do something, and who I have called at just the right time.”

I have no reason to believe that anything Greg was pushing on me was illegal or wrong; the investments, when I subsequently went to check them out, were legitimate. What was wrong was the idea that investments can be sold — and be appropriate — based on who answers the telephone and their emotional state at the time.

This is not a rant against telemarketers (though I will never say a kind word about anyone who sells investment products that way). My office phone is not on the National Do-Not-Call Registry precisely because I like hearing from guys like Greg to get a sense of whether stinky stuff is being foisted on the public.

Instead, Greg’s answer suggested people are vulnerable to these pitches expressly because they picked up the phone at the wrong time in their lives, the absolute wrong moment when — confronted with a slick sales script programmed to get a yes — their guard is down.

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NJ Man Sentenced in $100M Investment Fraud Case

A New Jersey man has been sentenced to 18 years in prison and ordered to pay more than $100 million in restitution for masterminding what a judge described as one of the biggest real estate frauds in state history.

Sixty-one year-old Wayne Puff of Old Bridge pleaded guilty in April to wire fraud. He admitted using his company, New Jersey Affordable Homes Corp., to lure real estate investors with promises of high returns.

Prosecutors say it was a Ponzi scheme, using money from new investors to pay earlier ones.

Hundreds of individuals and mortgage lenders were victimized.

Puff read a statement apologizing to investors, and turned to face several of them sitting in the Newark federal courtroom Thursday.

Ten co-conspirators have pleaded guilty.

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Indiana Women Accused of Online Investment Fraud

An Indianapolis woman has been sentenced to four years in prison after she was convicted of defrauding investors in an Internet business venture.

Sixty-seven-year-old Wanda Robertson pleaded guilty to securities fraud charges this week in a Johnson County court. She also was ordered to repay the victims a total of $170,000.

Authorities say Robertson solicited investors through the Web site Craigslist for a scheme where they would be paid for use of their credit histories to obtain loans for her business.

The charges resulted from an investigation by state police and the Indiana secretary of state’s office.

In need of a securities attorney? Try the lawyer directory.

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Report: Scott Rothstein to Enter Guilty Plea

Sibling publication the Daily Business Review reports (subscription required) that Scott Rothstein, the Fort Lauderdale lawyer accused of running a $1.2 billion Ponzi scheme at his former firm, is negotiating a plea with federal prosecutors.

The DBR’s Jordana Mishory reports that Rothstein’s lawyer, Marc Nurik, a former partner of Rothstein at now-defunct 70-lawyer Rothstein Rosenfeldt Adler (RRA), told reporters outside a federal court in Fort Lauderdale that his client didn’t deal with all of the victims who have come forward claiming losses.

“[Rothstein] is surprised at the amount of people who actually claimed to be investors,” Nurik told reporters. “He’s going to accept responsibility for his actions and do whatever he can to make sure that legitimate investors are made as whole as possible.”

According to the DBR, Nurik’s remarks lend credence to the belief that feeder funds and other intermediaries were involved in expanding a fraud that prosecutors believe dates back to 2005.

The DBR reports that Banyon Investment Fund, the lead creditor in the bankruptcy of RRA with an estimated $300 million in losses, has been excluded from the creditors committee because it’s suspected of serving as a feeder fund for the alleged fraud. (Kobre & Kim’s Matthew Menchel, a lawyer for Banyon, was not immediately available for comment.)

At this point in time, Rothstein’s cooperation with the government appears limited to his own involvement in the fraud. Nurik says his client has not spoken to prosecutors about alleged coconspirators in the case, the DBR reports, noting that Rothstein has already surrendered between $60 million to $100 million for distribution to victims.

Rothstein pled not guilty last month to federal conspiracy, fraud, racketeering, and money laundering charges. Rothstein can change that plea at a hearing before U.S. district court judge James Cohn scheduled for January 27. A plea could see the disbarred lawyer serve between 30 years to life in prison.

Since his arrest in early December, Rothstein has remained incarcerated in Miami’s federal detention center. When news of the fraud first broke two months ago, Rothstein was in Morocco for reasons that have yet to be determined. The 47-year-old lawyer later returned to the U.S., as the FBI and other federal agents seized RRA records and Rothstein’s myriad properties and luxury items.

Meanwhile The Miami Herald reports a trustee overseeing the liquidation of Rothstein’s firm, former Florida judge Herbert Stettin, has filed suit against ex-RRA partner Steven Lippman seeking $4 million in reimbursement for loans, bonuses, and personal expenses when he was with the firm.

Stettin’s bankruptcy lawyers from Florida firm Berger Singerman filed the suit against Lippman in Fort Lauderdale and are expected to pursue similar actions against other former RRA employees, The Herald reports.

Lippman’s lawyer, Miami attorney Bruce Zimet, told The Herald his client has done nothing wrong.

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Twins Accused of Investment Fraud

Twin brothers living with their mother in New York were arrested and charged with stealing more than $2 million from investors, mostly through an account with Fidelity Investments.

Makara and Tsele Nkhereanye, 38, were indicted on multiple counts of grand larceny, securities fraud, forgery and scheme to defraud, Manhattan District Attorney Robert Morgenthau said today in a statement.

The brothers falsely claimed to be successful stock traders and persuaded more than 30 people to invest with them from January 2005 to June 2009, according to the statement. They are to be arraigned today in New York state court.

“Some investors were sufficiently taken in by what they believed to be monthly profits from their investment that they invested additional amounts, some even taking out loans to make their investments,” according to the statement.

The men claimed to earn 10 percent to 15 percent a month through stock trading and guaranteed their victims wouldn’t lose money, the district attorney said.

Some victims were told their money went into safe investments, and others were told the men had “a secret, profitable system of trading,” the DA said.

“E-mail reports from the brothers would list profits as high as 23 percent for a month,” the statement said. “Some victims received the reports monthly while others received them less frequently, but none of the reports ever showed the true state of the investor’s funds.”

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Two Southern California Men Accused of Investment Fraud

Federal regulators said Thursday that they obtained a preliminary injunction against two Southern California men accused of defrauding investors who put nearly $10 million into a fund to invest in mobile home parks.

A lawsuit filed by the Securities and Exchange Commission says Heath M. Biddlecome, 41, of Carpinteria diverted nearly half of the money raised and used it for so-called day trading.

The suit names as defendants Biddlecome; his firm, California Wealth Management Group of Culver City; and William C. Tak, 43, of Newport Beach, a senior vice president at the firm.

According to the complaint, filed Nov. 12 in federal court in Los Angeles, Biddlecome set up a fund called Homestead Properties in 2007, ostensibly to invest in mobile home communities, and raised $9.8 million from 36 investors. But the filing alleges that Biddlecome, without telling investors, moved $4.5 million from the fund to a brokerage account in late 2008 and began day-trading with the money, using such risky strategies as option trading and so-called short selling.

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Man Held for Investment Fraud, Duped Over 5,000

In one of the biggest investment frauds in the city this year, a man has been arrested for allegedly cheating over 5,000 people.

According to the police, the accused, Rupesh Kumar Verma, took around Rs 1.20 lakh once from every person, promising them Rs 8,000 per month for five years. Police officers say he has raked in several crores over the last three to four years.

Verma also ran a car-rental company from his KG Marg office and the police have found documents of 163 cars in his name. More cars are registered in the name of his company, Shri Om Sai Nath Pvt Ltd.

The arrest was made on Saturday and Verma has been remanded in police custody for seven days. A hunt is on for his other accomplices. The police have also recovered Rs 2.24 crore in cash from his office at the fifth floor at Naurang House, KG Marg.

On Friday, a group of 900 people had gathered at the Barakhamba Road police station, demanding action against Verma’s company. They alleged that they had invested money in the company since it was promising high benefits for a long term.

“Verma introduced himself as the chairman of the company,” said one of the victims. “I invested money because I was promised that I would be given huge interests for almost five years. I did not doubt the company’s intentions. The company had their brochures and proper documents and forms which we filled up.”

Explaining the modus operandi, a police officer said: “Verma allegedly kept lot of agents who used to bring in the investors. The company told the investors that their money will be invested in resorts in Gurgaon and Jaipur and in cars. Some people had even invested Rs 10 to 15 lakh in one go”.

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