Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

On Thursday, the U.S. District  Court for the Northern District of Georgia issued an order freezing the assets of SJK Investment Management, an investment advisor firm, as well as the assets of SJK's Chief Executive Officer Stanley Kowalewski, in an action by the Securities and Exchange Commission against SJK which sought an emergency freeze of the assets, according to a press release by Courthouse News Service. The SEC claims in its complaint, filed on Thursday, that SJK allegedly defrauded investors in two hedge funds worth approximately $65 million. Mr. Kowalewski is alleged to have placed $16.5 million of the funds into a separate account which he allegedly used for personal uses. Government officials claim that Kowalewski allegedly paid himself $1 million for personal and business expenses, charged an alleged $4 million "administrative fee" which he allegedly took as a salary draw, and allegedly lived rent free in a home that he caused the fund to purchase. SJK is also alleged to have sent investors false account statements showing fictitious returns on their investments, according to the complaint.  The complaint seeks permanent injunctions, penalties, disgorgement of profits and a ruling to bar Mr. Kowalewski from the financial industry.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Florida attorney and mastermind of a $1.2 billion Ponzi scheme, Scott Rothstein, was sentenced to 50 years yesterday in the U.S. District Court for the Southern District of Florida. The scam involved investments in non-existent settlements, and resulted in the loss of about $400 million to 400 victims. Rothstein wrote a letter to the court stating that he had entered into the scheme in order to help his law firm, Rothstein, Rosenfeldt & Adler, meet its costs of expansion. Rothstein used the income and his client's funds to live a lavish lifestyle, and to associate with the powerful and famous, including Florida Governor Charlie Crist and California Governor Arnold Schwartzenegger. When the scheme unraveled last October, Rothstein fled to Morocco, but returned after "praying" for several days.

The government had sought a sentence of 40 years, and Rothstein's counsel had argued for a reduced sentence based upon Rothstein's cooperation with authorities following his arrest, however the court imposed a longer sentence, citing Rothstein's "greed and arrogance." Rothstein reportedly has assisted authorities in helping to set up a reputed organized crime figure.

Only one of the many victims, a client whom Rothstein had represented in a municipal proceeding, spoke at the sentencing. Another victim, auto magnate Ed Morse, has claimed $57 million alone in losses from Rothstein's conduct.

The chief operating officer of Rothstein's firm, Debra Villegas, is expected to plead guilty on Friday to charges of conspiring with Rothstein in the scheme. Villegas is the only other individual from Rothstein Rosenfeldt & Adler to face criminal charges. A bankruptcy proceeding continues to attempt to recover assets, and investors have sued numerous defendants, including Toronto Dominion (TD) Bank, which Rothstein moved his monies through.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In a press release by the Department of Justice today, the Department announced that, in cooperation with the Ministry of Justice of Japan, it has recovered more than $40.2 million in proceeds from an alleged $1 billion Ponzi scheme by a Japanese citizen, Isamu Kuroiwa, involving investments in Filipino shrimp farms.

Kuroiwa operated "World Ocean Farm" from February 2005 to May 2007. Authorities allege that World Ocean Farm was a Ponzi style investment scheme which claimed to operate shrimp farms in the Philippines, and promised investors a 100 percent annual return on their money. According to the government, World Ocean Farm did own a couple of ponds in the Philippines, which contained no shrimp and were used to dupe traveling Japanese investors.

Instead, investors were treated to shrimp from local markets. Kuroiwa and his accomplices also allegedly told investors that World Ocean Farms was invested in high-yield investments in the U.S.

The scheme affected over 30,000 Japanese investors and defrauded them of approximately $1 billion (or ¥91 billion). Kuroiwa and his co-conspirators allegedly laundered investment monies through Japanese and American financial institutions. They used the proceeds to pay earlier investors and for their own personal uses, including a lavish gambling trip to Las Vegas. Kuroiwa was arrested, along with his accomplices.

The $40 million was returned to Japanese investors pursuant to an order of forfeiture by the U.S. District Court for the District of Columbia.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Former Minnesota billionaire and former owner of Polaroid and Sun Country Airlines Tom Petters was sentenced to 50 years imprisonment yesterday by the U.S. District Court for the District of Minnesota, according to the Associated Press. Petters, 52, was charged with a $3.7 billion Ponzi scheme--the largest in Minnesota history-- which had over 500 victims and defrauded hedge funds, pastors, missionaries and retirees, among others. His company, PCI, was alleged to have used false purchase orders and bank records to convince investors to finance alleged purchases of electronics which PCI would allegedly resell to retailers such as Sam's Club and Costco. The government contended that the alleged merchandise never existed. Petters was alleged to have taken $400 million of the investments to support his companies and a lavish personal lifestyle. 

Petters was convicted on 20 counts of conspiracy, mail fraud, wire fraud and money laundering in December. Petters told the Court that he was "filled with pain" for the lives which had been destroyed as a result of the conduct, but did not admit guilt. Petters had claimed at trial that he was unaware of the fraud in his organization, Petters Group Worldwide, and that his business associates were responsible. The prosecution had urged that Petters receive the statutory maximum sentence of 335 years; the defense had argued that 4 years would constitute sufficient punishment. He has cooperated with a court-appointed attorney in attempting to recover monies lost by the scheme.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

On Monday, the SEC filed a Complaint for Injunctive and Other Relief, in Federal court in Tampa, Florida, which may be viewed here, against Neil V. Moody and Christopher D. Moody, managers of the hedge funds Valhalla Investment Partners, L.P., Viking IRA Fund, LLC, and Viking Fund, LLC. Neil Moody, 71, and his son Christopher D. Moody, 35, are co-owners of the funds, based in Sarasota, Florida.

The Complaint charges that the Moodys allegedly recklessly violated anti-fraud provisions of Federal securities laws. Specifically, the SEC alleges that, from 2003 to 2009, the Moodys allegedly overstated investment returns and the value of the funds' assets by as much as $160 million in account statements provided to investors and offering materials provided to prospective investors. The Complaint also charges that the Moodys allegedly recklessly misrepresented to investors that they actively managed the funds, when in fact the investment and trading activities of the funds were managed by a third-party, namely Arthur Nadel of Scoop Management. Nadel, however, was the operator of a large Ponzi scheme involving hundreds of investors, including investors in the Moodys' hedge funds. Nadel allegedly fabricated false performance and account information which overstated the value of the Moodys' funds, and shared management and performance fees with the Moodys. The SEC filed an emergency action against Nadel in the Middle District of Florida last January, and was indicted in the Southern District of New York in April on six counts of securities fraud, eight counts of wire fraud, and one count of mail fraud.

Counsel for Christopher Moody has responded to the Complaint. “The SEC's complaint does not allege that Chris Moody knowingly intended to harm investors. The complaint alleges recklessness which Mr. Moody neither admits nor denies. Mr. Moody has cooperated from the outset with the receiver in the recovery of assets and will continue to do so,” said Mr. Moody’s attorney, Jeffrey L. Cox, of Sallah & Cox, LLP.

The Complaint alleges violations of Sections 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b); Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a); Section 206(4) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-6(4); Exchange Act Rule 10b-5, 17 C.F.R. § 240.10b-5; and Advisers Act Rule 206(4)-8, 17 C.F.R. § 275.206(4)-8. It seeks declaratory relief, a permanent injunction against the Moodys, disgorgement of all profits and civil penalties. A Receiver has been appointed for the funds.

• Email This
• Print
• Comments
• Trackbacks
• Share Link