A New York man will plead guilty to federal charges that he orchestrated a landscaping Ponzi scheme that duped investors out of at least $30 million through promises of annual returns of up to 400%. Eric Aronson, 46, pleaded guilty to a single count of securities fraud. While the charges carries a maximum 20-year prison sentence, Aronson's plea agreement with authorities calls for him to serve 121 to 151 months in prison.
According to authorities, Permapave was a conglomerate of companies controlled by Aronson that, beginning in 2006, solicited investors to fund the importation of PermaPave pavers from Australia for subsequent resale in the United States. Through unregistered promissory notes and "use of funds" agreements, investors were promised monthly returns ranging from 7.8% to 33.3%, which equated to annual returns of up to 400%. Aronson and the other defendants told potential investors that there existed an enormous backlog of orders for the pavers, and that investors would be repaid out of profits from the guaranteed sales.
When PermaPave began to fall behind on payments in late 2008, investors were mollified by an agreement to exchange the promissory notes for convertible debentures with a lower interest rate and a deferral of principal due. In total, at least 140 investors entrusted $16 million with the company. In 2009, investors were told that the company had been sold and were urged to convert their debentures into equity shares. In reality, the company had not been sold nor had it ever been profitable. Rather, the company was a massive Ponzi scheme that operated at substantial losses while using incoming investor funds to pay "returns" to existing investors. Of the tens of millions of dollars raised by PermaPave, Aronson and the defendants were accused of misappropriating millions of dollars for their own personal use.
Aronson's guilty plea is not his first fraud-related brush with the law. In 2000, Aronson pled guilty to an unrelated offering scam and later served time in federal prison. Ironically, Aronson was accused of using investor funds from his current scam to pay his court-mandated restitution payments to victims of his previous fraud.
The plea comes nearly three years after he was first indicted for the Permapave scheme along with executives Vincent Buonauro Jr. and Robert Kondtratick. The men were also the subject of an enforcement action by the Securities and Exchange Commission, which sought various remedies including disgorgement, civil penalties, and injunctive relief. At one point, the Commission sought to hold the men in contempt after accusing them of failing to cooperate with discovery by producing duplicate documents and even a DVD containing damaged and corrupted audio files.