Florida Lawyer Gets 3-Year Sentence For Helping Ponzi Schemer's Wife Hide $1 Million in Jewelry

A similar 12.02 carat ring (credit: Sun-sentinel.com)A Florida lawyer will spend the next three years in federal prison for assisting the wife of convicted Ponzi schemer Scott Rothstein hide more than $1 million in jewelry - including a 12.08 carat yellow diamond ring valued at nearly $500,000. Scott Saidel, 46, received the sentence from U.S. District Judge Robin Rosenbaum after previously pleading guilty to a single count of conspiracy to commit money laundering back in January.  Judge Rosenbaum noted Saidel's role as an attorney in fashioning the sentence, observing that Saidel's efforts were designed to prevent the approximately $1 million in assets from being used to compensate Rothstein's victims.  Saidel was previously disbarred from the practice of law.

Days after authorities learned that Scott Rothstein had been operating a massive Ponzi scheme, federal agents went to Rothstein's house to collect all cash and assets that were believed to have been purchased with scheme proceeds.  Kim Rothstein assisted agents in retrieving the assets, which included jewelry and numerous luxury watches - nearly all of which were later auctioned off by the U.S. Treasury.   However, Kim Rothstein and several others, including Saidel, concealed the existence of numerous pieces of jewelry from federal authorities, including a 12.08 carat yellow diamond that Rothstein had recently purchased for approximately $400,000.  Additionally, Kim Rothstein also failed to turn over:

• An engagement ring and wedding band with 18 emerald cut diamonds;
• 10 watches, including a Rolex with leopard design, a woman's Piaget and a platinum/diamond Pierre Kunz;
• 5 sets of earrings, several necklaces, and a variety of gold coins; and
• Pearl, diamond, and sapphire cufflinks, and 50 1-ounce gold bars

After the items were withheld from authorities, Rothstein and two others attempted to sell several of the pieces to local jewelers.  Saidel agreed to hold some of the proceeds from the sale in his attorney trust account to prevent their disclosure to investigators.  Even Scott Rothstein was pressured to lie to investigators about the whereabouts of the missing jewelry (and was rumored to have refused to do so). 

However, court-appointed bankruptcy trustee Herbert Stettin and his team soon began to discover several missing pieces of jewelry during their investigation, and authorities later charged Kim Rothstein, Saidel, and several others, including two local jewelers they alleged were complicit in the scheme.  Both Rothstein and Saidel entered into plea agreements with prosecutors - with Saidel agreeing to forfeit over $500,000 to authorities that included (1) $65,000 in legal fees paid by Kim Rothstein; (2) four expensive pens; and (3) a pair of mother of pearl, diamond, and sapphire cuff links. 

Kim Rothstein has remained free on bail while her sentencing has been repeatedly delayed, and is currently scheduled to be sentenced November 12, 2013.  The most recent delay came before her scheduled sentencing on October 7, 2013, with her lawyers seeking the delay so she could testify against the two jewelers accused of helping her sell the jewelry.  After granting that delay, Judge Rosenbaum warned Rothstein's lawyers that no more delays will be granted.  

Disgruntled Victims Apprehend Fugitive Ponzi Schemer, Hand Over To Authorities

An Indian man suspected of masterminding a massive Ponzi scheme is no longer a fugitive after he was captured - by a group of disgruntled investors, no less - and turned over to authorities.  Badarul Islam, the former managing director of a company known as "Finix," had been a fugitive from authorities for more than one year after the company shut its doors to investors.  However, his time on the run came to an end as Islam was apparently apprehended by a group of aggrieved investors that had been searching for him.  After his capture, Islam was subsequently turned over to police.  

While details remain scarce, Islam is alleged to have acted as managing director for "Finix," which solicited investors with the promise of outsized returns.  After collecting a "considerable" sum of money from investors, which is estimated to be in the hundreds of thousands, if not millions, of dollars, Islam's branch closed down and all employees fled town.  

Islam had been on the run for over a year before being spotted by investors.  Police have confirmed that an investigation remains ongoing.

Michigan Man Gets Six-Year Prison Term For "GetMoni" Ponzi Scheme

A Michigan man who agreed to solicit investors for a "GetMoni" venture only after he learned it was a Ponzi scheme was sentenced to serve more than six years in federal prison.  John James Missitti, of Genesee Township, Michigan, was sentenced by U.S. District Judge Mark A. Goldsmith after previously pleading guilty to one count of wire fraud conspiracy and one count of filing a false tax return.  Missitti was also ordered to pay nearly $300,000 in restitution to the Internal Revenue Service.  

Missitti was originally an investor in GetMoni.com, which promised above-average returns through several ventures, including (1) making loans to building contractors; (2) providing loans for air conditioning contracts; and (3) extracting gold and silver from mines.  However, Missitti soon learned that the venture was a Ponzi scheme, but instead of going to authorities worked out an arrangement with the principals, Ronald and Bonnie Brito, to receive commissions for soliciting new investors to the scam.  

Missitti then began soliciting investors by holding seminars, even passing around a silver bar to investors that supposedly was produced from one of the mines.  At these seminars, potential investors were told that they could expect annual returns of up to 100%.  Missitti would ultimately be responsible for bringing more than 100 investors into GetMoni.com who suffered total losses of approximately $4.5 million.  For his role, Missitti received hundreds of thousands of dollars in bonuses and commissions.

The case against the Britos and several other defendants remains ongoing.  

A cease-and-desist order filed by Michigan is here.

Petters Associate Sentenced to 17-Year Prison Term

A Minnesota hedge fund manager will spend the next 17 years in prison for his role in soliciting investors for the $3.65 billion Ponzi scheme perpetrated by Thomas Petters - the largest Ponzi scheme in Minnesota history and third-largest in U.S. history behind only Bernard Madoff and Allen Stanford.  James Fry, 59, was sentenced by U.S. District Judge Richard Kyle to a 17.5-year prison term.  Fry was convicted by a federal jury this summer of twelve counts of wire fraud and securities fraud - each of which carried a maximum prison term of twenty years.  Prosecutors had been seeking a 25-year term for Fry.

Fry was the CEO of Arrowhead Capital Management, LLC ("Arrowhead"), which served as an investment advisor to a number of hedge funds.  Beginning in 1999, Fry began working with Frank Vennes - who had a felony criminal record that was withheld from investors - to raise funds to invest in promissory notes issued by Petters' company, Petters Company Inc. ("PCI").  PCI raised billions of dollars from investors who believed their funds were being used by PCI to purchase and resale consumer electronics to big-box retailers.  

However, despite learning that Petters did not have the large-scale deals he purported to have with big box retailers, Fry was accused of continuing to solicit millions of dollars from investors to entrust with Petters.  Indeed, while Fry told investors that a 'big-box' retailer would make payments directly to an Arrowhead bank account, the reality was that Arrowhead received all payments from PCI.  In total, Fry received more than $41 million in commissions alone from PCI, and authorities attributed the losses attributable to Fry's funds at Arrowhead at close to $130 million.  

Vennes, who served as Fry's link to Petters' scheme, is scheduled to be sentenced October 18th.  Pursuant to his plea agreement reached with prosecutors, Vennes faces a maximum potential sentecne of 15 years.

Trial Set To Begin Tuesday For Madoff Employees

Five of Bernard Madoff's closest employees are set to begin trial on Tuesday to face charges that they played key roles in assisting Madoff orchestrate the largest Ponzi scheme in history.  Jury selection is set to begin Tuesday for the five, who consist of three of Madoff's most tenured employees as well as two computer programmers.  The "Madoff Five," as they have been referred to, consist of long-time employees Daniel Bonventre, the firm's back-office director of operations, Annette Bongiorno, Madoff's longtime secretary, and Joann Crupi, an account manager, as well as computer programmers Jerome O'Hara and George Perez.  Each of the five face a series of charges, including conspiracy to defraud, securities fraud and falsifying records of a broker-dealer, which could result in a potential prison term of several decades.  

While Madoff has maintained that he acted alone in perpetrating his scheme, prosecutors will seek to paint each of Madoff Five as playing a crucial role in his scheme. In a statement announcing the arrest of Bongiorno and Crupi, Manhattan U.S. Attorney Preet Bharara provided a glimpse of the prosecution's strategy when he stated that "a house of cards is almost never built by one lone architect." This includes a collection of evidence implicating the five, including:

• The discovery of a handwritten note in O'Hara's desk from 2006 saying "I won't lie any longer,"
• The awarding of salary increases and bonues to O'Hara and Perez as hush money,
• The allegation that Bongiorno created bogus financial records for Madoff,
• Bongiorno's management of nearly $9 billion in Madoff investor accounts,
• Crupi's management of approximately $900 million in Madoff investor accounts, and
• Bonventre's role in providing false reports and data to outside reviewers.

The prosecution will also be introducing the testimony of several former Madoff employees that have agreed to cooperate with the government, including star witness Frank DiPascali, Jr., who worked at Madoff's firm for over 30 years and served as Madoff's top lieutenant.  DiPascali pleaded guilty to 10 felony counts, including conspiracy and tax evasion, in August 2009 and has been cooperating with the government ever since.  While DiPascali pledged at his plea hearing that he "would dedicate all my energy to trying to explain to others how this happened,” he is expected to be face intense questioning from attorneys for the Madoff Five, whose focus will be to discredit DiPascali's testimony and perhaps shift the focus to DiPascali's own culpability.  

According to the Guardian, Madoff's claims that he acted alone stand in stark contrast to the seven guilty pleas entered besides the Madoff Five that have been indicted.  Madoff was sentenced to a 150-year prison term in June 2009 - the longest sentence handed down for a Ponzi schemer.  

The indictment against the Madoff Five is below:

Madoff Indictment by DealBook