Florida Securities Fraud Lawyer Blog

Following the 14-year prison sentence handed to Ponzi schemer Art Nadel, prosecutors are now seeking a longer sentence for a fellow Southwest Florida fraudster. Prosecutors will be asking the court to sentence Beau Diamond to between 17 ½ and 22 years in prison. This prison term will be in addition to the forfeiture money judgment of $37.7 million against Diamond. Prosecutors will also request the forfeiture order be incorporated into Diamond's sentence, and that the court retain jurisdiction over money or property which could serve as a substitute asset. The trustee in Diamond's bankruptcy case will be on a similar mission of finding assets for jilted investors.

Prosecutors cite to the egregiousness of Diamond's scheme and the profile of a large number of his investors as justification for the heavy recommended sentence. Among those investors highlighted by the prosecution were a husband and wife, battling multiple sclerosis and cancer, and whose sole source of income came from their investment in Diamond Ventures. Despite communications from the couple emphasizing the need for safety in their investments, Diamond continually lied, telling them that their money was "in the safest place in the world."

The SEC has charged two employees at Bernard L. Madoff Investment Securities LLC (BMIS) with participating in the largest Ponzi scheme in American history. Anette Bongioro created phony account statements for investors and took money for her personal gain. Joann Crupi conspired to cash out Madoff's friends and family as the fraud was collapsing and created fraudulent investor account statements.

The SEC alleges that Annette Bongiorno, who began working for BMIS in an administrative capacity in 1968, regularly created false books and records. She helped mislead investors in telephone conversations and through account statements and trade confirmations that reported securities transactions that never happened and positions that never existed. She also created false trades in her own BMIS accounts that enabled her to cash out millions.

The SEC alleges that JoAnn Crupi, who began working for BMIS in 1983 and later became responsible for supervising the primary bank account used in BMIS's investment advisory operations, helped facilitate the fraud and mislead investors, auditors, and regulators into believing that BMIS was a legitimate business. When the fraud was near collapse, Crupi decided which accounts should be cashed out and prepared checks for select investors, including Madoff's family and friends.

Bongiorno falsified trades in her own accounts, depositing approximately $920,000 and withdrawing approximately $14.5 million. She fabricated sham, backdated, and highly profitable "trades" to cover for these withdrawals.

Crupi supervised some lower-level BMIS employees and worked closely with Frank DiPascali, another high-level BMIS supervisor charged by the SEC. Crupi maintained exclusive control over two important aspects of the BMIS fraud: she handled the primary bank account used in the Ponzi scheme, and she created false trading portfolios and account statements related to a purported hedging strategy.

Shortly before the collapse, Crupi met with DiPascali to discuss that it was near the end. Yet, Crupi continued to process client deposits during this time period, depositing approximately $59 million of client checks into the Ponzi scheme bank account.

In the final days of the fraud, Crupi helped DiPascali review BMIS investor lists and identify which accounts should be cashed out. Madoff approved these actions and Crupi prepared checks for the selected investors totaling more than $350 million. Madoff was arrested and the checks were seized before they could be distributed.

These charges evidence how a Ponzi scheme rarely can last for so long or maintain the face of legitimacy without the participation of co-conspirators. It also appears that SEC now is working hard to redeem itself for a period of years spent sleeping at the wheel.

Sharon Carter, formerly married to Neil Moody, has surrendered in excess of $1.1 million in property to try and settle her case against Nadel's receiver. Moody was a business partner with ponzi-schemer Art Nadel. The $1.1 million, however, falls well short of the nearly $4 million the receiver claimed was transferred to Carter and her revocable trust via distributions and profits. While the receiver paints Carter as someone who profited from the scheme, Carter paints herself as a victim. She claims to have lost all of her money in one of Nadel's hedge funds, and she is now living off of Social Security. Her divorce from Moody was finalized this year.

At the top of the list of property surrendered is her Colorado home, which she owned prior to her marriage to Moody but made significant improvements with her ex-husband's money. An appraisal indicated between $450,000 and $500,000 in equity. The house is located in Evergreen, Colorado, in an exclusive foothills development. Another $350,000 will come from furniture, jewelry antiques and other personal property. Another $300,000 derives from the assignment of tax refunds Carter may claim from her investment in the hedge funds. A final $39,000 will be paid in cash.

On November 5, 2010, former "CHiPs" star Larry Wilcox pled guilty in the United States District Court for the Southern District of Florida to one count of conspiracy to commit securities fraud.

As part of the plea agreement, Wilcox, 63, admitted to conspiring to defraud a pension plan out of $40,000. Wilcox was CEO of UC Hub Group, a corporation registered in Delaware, that allegedly ran gold mines, according to the charging documents. He also owned millions of shares in UC Hub Group.

Wilcox purportedly traveled to Broward County in January and February 2009, where he met with an FBI confidential source - posing as a representative of a pension fund fiduciary willing to breach his fiduciary duty to the pension fund - to discuss stock sales.

At that time, Wilcox allegedly agreed that the undercover agent would buy the company's stock at inflated prices, and in return Wilcox would pay the agent a 40% kickback fee. Wilcox received numerous $20,000 payments, and he or his co-conspirators sent back numerous $8,000 payments to an unidentified address in Coral Springs.

As part of the agreement, Wilcox will not appeal his punishment and faces up to five years in prison and a $250,000 fine. Sentencing is January 28, 2011.

In an effort to determine the utility of creating a universal fiduciary-duty standard in the retail investment advice industry, a recent study by the Securities Industry and Financial Markets Association shows that a potential universal standard could be costly to investors without adjustments being made for special broker-dealer practices. Broker-dealers, who currently adhere to a suitability standard, can charge commissions and sell proprietary products. Under a universal fiduciary duty standard, broker-dealers run the risk of violating these duties by adhering to traditional broker-dealer practices. Accordingly, a shift of wealth toward fee-based investments advisors would result in additional fees (between 25-75%) being charged to the investors.

Critics claim the study has no value because the Dodd-Frank law already says selling proprietary products and charging commissions are not fiduciary breaches. The study also shows the universal fiduciary-duty standard would limit access to municipal and corporate bonds, 93% of which are purchased through brokerage accounts. Ultimately, SIFMA is looking to define the best possible standard of care for giving personalized investment advice to retail investors, regardless of whether the person giving the advice is an investment advisor or broker-dealer.

NFL players are finding themselves abused by brokers with bad investments in Ponzi and other fraudulent schemes.

Hall of Fame Quarterback, John Elway, recently disclosed that he and his partner gave $15 million to a hedge fund manager, who was allegedly running a Ponzi scheme.
New Orleans Saint, Alex Brown, sued his financial advisors over $3.9 million in losses, alleging they had "abused the trust," including bad investments in airplane hangars.
Broker Mary Wong pleaded guilty to stealing more than $3 million from investors, including Eagles quarterback Michael Vick.

These cases come as the NFL Players Association, the union representing 1,800 players, looks to strengthen the screening process for its financial adviser program, which has come under attack in recent years.

Professional athletes are susceptible to being taken advantage of when it comes to investing their money. They often are unsophisticated investors and have a high net worth.

After adviser William "Tank" Black was convicted of stealing $11 million from players he represented, a program was started that requires advisers have appropriate financial qualifications, such as a certified financial planner mark or FINRA registration to be included on a select list for players.

These advisers must also undergo a background check, and pay $1,500 to be included on the list and $500 annually to remain on it. There are currently about 450 advisers on the list.

Pro athletes are considered targets for investment scams and unscrupulous brokers. Such athletes often place heavy reliance upon their advisors and do not pay attention to, or understand, the details of sophisticated investment products.