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Recent SEC Releases
Sunday
Sep162012

Former Attorney At Rothstein Firm Receives Three-Year Prison Sentence

A former attorney in the law firm used by Scott Rothstein to perpetrate his $1.4 billion Ponzi scheme was sentenced to serve three years in federal prison for helping the firm make illegal federal campaign contributions.  Steven Lippman, 50, was sentenced by United States District Judge James Cohn after previously pleading guilty to one count of conspiracy earlier this year.  The sentence was less than the 41-month to 51-month range recommended by prosecutors, although not as low as the 18-month range sought by Lippman's lawyers.  Lippman was also fined $15,000 and ordered to pay $179,000 in restitution.

According to authorities, Lippman sought to increase the political clout of Rothstein's former law firm, Rothstein Rosenfeldt & Adler ("RRA") by illegally "bundling" political campaign contributions to Senator John McCain's failed 2008 presidential bid.  In return for serving as a 'straw donor', RRA provided Lippman with money, home renovations, and a $134,000 Maserati, among other things.  Through these contributions, RRA became the largest contributor to McCain's campaign.  

Lippman is the latest in former RRA associates to be charged for a role in Rothstein's scheme.  Rothstein was sentenced in June 2010 to a fifty-year sentence.  

Sunday
Sep162012

Men Behind $1.6 Million Hawaii Ponzi Scheme Sentenced to Prison

Three members of a Honolulu investment group were sentenced to federal prison for their role in a Ponzi scheme that bilked investors out of nearly $2 milion.  Syed Qadri, 39, Ruben Carrillo Gonzalez, 50, Jeffrey Greenhut, 40, received prison sentences of fifty-one months, forty-one months, and twenty-four months, respectively.  United States District Judge Leslie Kobayashi also handed down a one-month sentence to Qadri's wife, Patricia Rodzkowski, for her role in the scheme.  The three men had pled guilty in June.  

According to authorities, the men operated Amasse Capital LLC ("Amasse") and Solomon & Co LLC ("Solomon").  From january 2006 to September 2006, the companies purported to invest in high-yield bonds that were advertised as nearly risk-free, with investors promised monthly returns ranging from 100% to 400%.  However, in reality, the operation was a classic Ponzi scheme, with investor funds being used to make Ponzi-style payments to existing investors.  

In addition to the prison sentences, Judge Kobayashi also ordered the three men to pay restitution to their victims.

Sunday
Sep162012

Man Who Offered "Get Rich For Sure" Investment Accused of $20 Million Ponzi Scheme

 

A California man has been arrested for what authorities called a massive Ponzi scheme that may have defrauded investors and lenders out of more than $20 million. Lawrence "Lee" Loomis, 54, along with six other associates, was named in a 50-count indictment charging him with mail fraud and wire fraud. According to the indictment, Loomis is accused of perpetrating multiple fraudulent schemes through his company, Loomis Wealth Solutions ("LWS"), at least one of which with the assistance of his father-in-law, John Hagener. Each count of mail fraud and wire fraud carries a maximum sentence of twenty years in prison as well as a fine of up to $250,000.

According to the Federal Bureau of Investigation, which conducted the investigation along with assistance from the Internal Revenue Service, Loomis pitched investors on the possibility of acquiring real estate at no cost through an investment in LWS. Specifically, investors were told to (1) purchase whole life insurance, (2) "harvest" home equity and retirement accounts to buy shares in the Naras Funds, and (3) to serve as "nominees" in the purchase of residential real estate controlled by Loomis. For each house an investor agreed to serve as "nominee" for, Loomis promised a monthly payment of $300 that could be applied to the life insurance premiums. According to Loomis, this investment plan was

"simply the best financial plan ever created." 

As part of the plan, investors purchased shares in the Naras Funds, which offered guaranteed annual returns of 12%. According to Loomis, these above-average returns were the result of investments in junior mortgages paying 14% annual returns. To assure investors that their contributions would be safe, Loomis represented that the Funds were guaranteed by secured deeds of trust and the backing of a third-party company. Loomis is also accused of participating in several other schemes designed to artificially inflate home values through property-flipping.

Loomis held numerous hotel seminars in California, Washington, and Illinois in which he solicited potential investors. Investors were provided with literature extolling the benefits of Loomis' investments. According to a California news-station, Loomis told investors that

"It's not get rich quick. But the reality of it is it's get rich for sure."

All told, it is estimated that nearly 200 investors entrusted at least $20 million with Loomis and his various schemes. However, according to authorities, Loomis used the constant infusion of investor funds to operate a massive Ponzi scheme and sustain his lavish lifestyle. Investors were provided with false account statements showing investment growth when, in reality, Loomis was simply using new investor funds to pay Ponzi-style returns to existing investors. The Sacramento Bee quotes unnamed federal authorities in estimating that losses could potentially top $100 million. 

Hagener was released on $1 million bond, while Loomis was ordered to remain in federal custody over fears that he posed a flight risk due to the severity of the charges.

Friday
Sep142012

Accountant Pleads Guilty in $6 Million Ponzi Scheme

A New York man pleaded guilty to fraud charges for masterminding a Ponzi scheme that bilked victims out of $6 million.  Alan Ritter, 69, appeared in a New York federal court today where he agreed to plead guilty to three counts of wire fraud.  Wire fraud carries a maximum prison sentence of twenty years as well as criminal monetary penalties.  According to Ritter's attorney, Ritter's gambling problem was "the root cause of these really awful acts."

Since 2001, Ritter used his position as a self-employed accountant to solicit funds towards various business investments from clients and personal friends.  As Ritter continued to receive funds from investors, the majority of incoming funds were used to make Ponzi-style payments on the loans and for personal expenses that apparently included a penchant for gambling.  

The guilty plea to three charges of wire fraud is on the high side for sentencing based on the amount of victim losses.  While it is highly unlikely that Ritter's eventual sentence will be anywhere near the maximum sentence of sixty years, it is likely that the sentence could be a life sentence given Ritter's age.

Sentencing is scheduled for January 16, 2013.  While it is likely restitution will be ordered to Ritter's victims, his attorney has indicated that Ritter is destitute.  

Thursday
Sep132012

Former Stanford Chief Investment Officer Receives Three-Year Prison Sentence

The former chief investment officer of Allen Stanford's financial empire was sentenced to serve three years in prison after she pled guilty to obstructing an investigation by the Securities and Exchange Commission ("SEC") into Stanford's operations.  Laura Pendergest-Holt, 39, had agreed to plead guilty only days after Allen Stanford was sentenced to 110 years in prison after being convicted of operating a $7 billion Ponzi scheme rivaled only by Bernard Madoff.  The sentence is consistent with her plea agreement, in which prosecutors agreed to recommend a sentence of thirty-six months in prison followed by a term of supervised release.  It was unclear from immediate news reports whether United States District Judge David Hittner ordered Pendergest-Holt to pay restitution.  

The charges derived from the SEC's initial investigation into Stanford's operations, which resulted in the issuance of subpoenas to Stanford and another employee to provide testimony on the operations of Stanford International Bank, Ltd. ("SIB").  After the subpoenas were issued, a Stanford attorney convinced the SEC to allow the substitution of Pendergest-Holt to give testimony, intimating that she was more familiar with operations than Stanford.  Pendergest-Holt then participated in several weeks of meetings with Stanford executives where she was coached on the testimony she was expected to give.  Her testimony omitted crucial details of SIB's finances and omitted or misrepresented other relevant information.  According to prosecutors,

"Holt acknowledged that her eventual appearance and sworn testimony before the SEC was a stall tactic designed to frustrate the SEC's efforts to obtain important information about SIB's investment portfolio.  Holt admitted she took this action intentionally and corruptly, knowing that her testimony would impede the SEC's investigation and help SIB continue operating."

Holt is the third-highest ranking official to receive prison time after Stanford and Stanford's CFO, James Davis.  Incidentally, Pendergest-Holt carried on an affair with Davis, who served as the prosecution's chief witness against Stanford.  Two other Stanford officials are scheduled to stand trial beginning later this month.  

A copy of the indictment is here.