By Nicole Bullock in New York www.ft.com
Published: July 28 2010 02:37 | Last updated: July 28 2010 02:37
US authorities pushed ahead with a sweeping investigation into the $2,800bn municipal bond market with the indictment of three former executives of units of GE Capital on charges of fraud and conspiracy.
Dominick Carollo, Steven Goldberg and Peter Grimm were charged on Tuesday with fraud and conspiring to rig bids for municipal finance contracts from 1999 to 2006, the US Department of Justice said. The 12-count indictment, which was filed in a federal court in New York, only identified their employer at the time as “a group of separate financial services companies located in New York, New York ... owned or controlled by a company headquartered in Fairfield, Connecticut.”
The company is GE Capital, according to a person familiar with the matter.
GE Capital said it had co-operated and was continuing to co-operate with the investigation.
Four individuals, including Mark Zaino, a former director at UBS, the Swiss bank, have already pleaded guilty in the investigation.
At issue is what is meant to be a competitive bidding process for investment contracts used by public entities.
Financial institutions are among the providers of these investment agreements and other related municipal finance contracts.
Public entities typically hire a broker to conduct a competitive bidding process for the contract to invest money, usually raised through bond sales and earmarked for public projects.
The companies that employed Mr Carollo, Mr Goldberg and Mr Grimm all marketed financial products and services, the indictment said. They are charged with conspiring with brokers to attempt to increase the number and profitability of investment agreements and other municipal finance contracts.
“The elaborate schemes outlined in the indictment boil down to efforts by these defendants to subvert the competitive bidding process for investment agreements. In the process, they defrauded public entities ... and put bondholders at risk,” said George Venizelos, acting assistant director-in-charge at the Federal Bureau of Investigation.
According to court documents, a Beverly Hills, California-based firm known as CDR Financial Products was one of the co-conspirator brokers. Three former CDR employees have pleaded guilty in relation to this investigation and charges have been filed against three other top executives at the firm.
If convicted, each man faces a prison term and significant financial penalties.
Mr Goldberg’s lawyer John Siffert, a partner at Lankler Siffert & Wohl, declined to comment, Mr Carollo could not be reached for comment and Mr Grimm’s employer, Lamont Financial Services, said the firm had no comment.
20100804
Trusted family attorney ‚ ¨Made off" with entire family estate.
Centurycitynews.com
Published 03/16/2010 - 11:29 a.m. PST
Since the Bernie Madoff schemes erupted in the news, courts have been seeing many individual cases where the trusted family attorney-accountant set up a complicated series of trusts for estate planning and asset protection, and then all of the money seemed to disappear. Because the trusted family attorney converted and self dealt with 16 trusts at one time, the pattern of deception was readily perceptible, and there were enough motivated attorneys to devote the time and energy to unravel the complex array of trusts and entities. A Century City Rotarian has been involved in such a case, and he pointed us to the court records or this emerging story. The court record seems to say it all. This is the first in a series of five pieces about how the trusted family attorney made off with the entire Alta Dena estate, and what has been done, and what is being done to restore it to the family. This article is based entirely on the documents in the court record.
Part 1
Since 2009, Bernard Madoff name has become infamous as the architect and mastermind who craftily engineered the financial theft of billions of dollars from his clients: close family members, longtime friends, hedge fund managers, charitable foundations. The Steuve family, a storied and historic family of hardworking dairy farmers who formed the famous Southland dairy commonly known as Alta Dena Dairy, had, unbeknownst to them, a person masterminding the theft of all of the assets and liquidity. Unfortunately for the Stueve family, their Madoff was their own family attorney and trustee of all of their charitable foundations-- Raymond A Novell.
Raymond A Novell, also known as ‚ ¨SRan‚ ¨ù, grew up near the Stueve farm and creamery, even working for the Stueve family in their ‚ ¨Scash and carry‚ ¨ù business while in high school. Novell also attended high school with the Stueve daughters, went on a summer tour of Europe with one of the Stueve sons, and was so close to the family that he promised to walk one of the Stueve grandchildren down the aisle at her wedding. Novell was also always there for the large Stueve family functions-- the birthday parties, the weddings, the after school sports events, the anniversary celebrations. So it was no surprise in the 1980s that Novell became the company attorney, yet he was unsuccessful in defending the Stueves in a lawsuit which cost the family $10,000,000. The founders of the Alta Dena Dairy were three Stueve Brothers: Edgar, Harold and Elmer Steve, who are all now deceased. The brothers were hardworking German farmers, who prized being loyal and having character, and so they kept Raymond Novell as their attorney, despite his weak legal representation.
Moreover, while representing the family, Novell had trouble with the State Bar of California. He admitted to having misappropriated client funds from his attorney-client trust account and he was suspended from the practice of law for 40 days in 2001, from approximately November 2001 to January 2002. Novell was placed on two years probation. However, during his suspension, and while prohibited from the practice of law, Novell continued to work on the Stueve family legal work, forming the EHE Family Foundation, which is one of the centers from which deception and thievery evolves. It appears that none of the Stueve family members knew about his suspension from the California State Bar and Novell neglected to inform them.
Before Raymond Novell started handling their business and family affairs, the Stueve brothers had a combined wealth of over $50,000,000.00. The Stueves, having a family estate of considerable value through decades of hard work in the dairy business, wanted only to ensure that their family estate could be organized and managed so as to: first, provide income to fund the relatively modest living expenses the family members; and secondly, to funnel any assets remaining in the estate upon each member's death to the family's various charitable interests.
Novell with attorneys Jennifer Novell Miller and J. Wayne Allen approached the Stueve family with dire warnings of impending tax liability that would wipe out most of the estate, and thereby deprive them of the ability to meet the above-stated goals, upon the death of one or more of the senior Stueve brothers. Given the family's long-standing relationship with Novell, which begain when he was in grade school, the Stueves trusted Novell and took his warnings very seriously. The family looked to Novell for advice on how best to position the estate in order to ensure that their estate planning goals could be met.
Novell informed the Stueves that the estate was "cash poor" and would not have enough money available to pay that tax burden without liquidation of its various assets for amounts substantially below their fair market value. Novell warned the Stueves that, as a result of those impending tax burdens, and without an immediate and comprehensive restructuring of the family's estate plan, the estate would not retain sufficient value to meet the family's goals of providing lifetime support for the Stueve children and grandchildren and funding for their considerable charitable interests.
Novell, Allen and Novell Miller advised the Stueve family that this onerous tax burden could be avoided and the family's estate planning and charitable goals realized through implementation of a complex plan requiring the establishment of various irrevocable trusts and formation of various charitable foundations.
For assistance with a complex family estate scheme for the Stueve family, yet in actuality was designed to enrich Novell and his family and his associates, Novell enlisted the help of various other individuals and entities, whom he at one point has described as a "team of wealth management specialists." Novell's "team" at various points in time included, but was not necessarily limited to, attorney Wayne Allen, his daughters, attorney Jennifer Novell Miller and real estate agent Maggie Novell, and his wife, Helen Mouat, a former CFO of a public company.
Novell and his team of conspirators are believed to have taken over $15,000,000 in loans and over $3,000,000 in fees. The team has formed foundations and funneled money to themselves by making loans to themselves, to Novell‚ ¨!"s daughters and Novell‚ ¨!"s wife and several businesses that Novell had started while charging trustee fees, and also charging hefty management fees and commissions.
In total, Novell is alleged to have converted, looted, and lost over $50,000,000.00 of the Stueve family fortune.
Published 03/16/2010 - 11:29 a.m. PST
Since the Bernie Madoff schemes erupted in the news, courts have been seeing many individual cases where the trusted family attorney-accountant set up a complicated series of trusts for estate planning and asset protection, and then all of the money seemed to disappear. Because the trusted family attorney converted and self dealt with 16 trusts at one time, the pattern of deception was readily perceptible, and there were enough motivated attorneys to devote the time and energy to unravel the complex array of trusts and entities. A Century City Rotarian has been involved in such a case, and he pointed us to the court records or this emerging story. The court record seems to say it all. This is the first in a series of five pieces about how the trusted family attorney made off with the entire Alta Dena estate, and what has been done, and what is being done to restore it to the family. This article is based entirely on the documents in the court record.
Part 1
Since 2009, Bernard Madoff name has become infamous as the architect and mastermind who craftily engineered the financial theft of billions of dollars from his clients: close family members, longtime friends, hedge fund managers, charitable foundations. The Steuve family, a storied and historic family of hardworking dairy farmers who formed the famous Southland dairy commonly known as Alta Dena Dairy, had, unbeknownst to them, a person masterminding the theft of all of the assets and liquidity. Unfortunately for the Stueve family, their Madoff was their own family attorney and trustee of all of their charitable foundations-- Raymond A Novell.
Raymond A Novell, also known as ‚ ¨SRan‚ ¨ù, grew up near the Stueve farm and creamery, even working for the Stueve family in their ‚ ¨Scash and carry‚ ¨ù business while in high school. Novell also attended high school with the Stueve daughters, went on a summer tour of Europe with one of the Stueve sons, and was so close to the family that he promised to walk one of the Stueve grandchildren down the aisle at her wedding. Novell was also always there for the large Stueve family functions-- the birthday parties, the weddings, the after school sports events, the anniversary celebrations. So it was no surprise in the 1980s that Novell became the company attorney, yet he was unsuccessful in defending the Stueves in a lawsuit which cost the family $10,000,000. The founders of the Alta Dena Dairy were three Stueve Brothers: Edgar, Harold and Elmer Steve, who are all now deceased. The brothers were hardworking German farmers, who prized being loyal and having character, and so they kept Raymond Novell as their attorney, despite his weak legal representation.
Moreover, while representing the family, Novell had trouble with the State Bar of California. He admitted to having misappropriated client funds from his attorney-client trust account and he was suspended from the practice of law for 40 days in 2001, from approximately November 2001 to January 2002. Novell was placed on two years probation. However, during his suspension, and while prohibited from the practice of law, Novell continued to work on the Stueve family legal work, forming the EHE Family Foundation, which is one of the centers from which deception and thievery evolves. It appears that none of the Stueve family members knew about his suspension from the California State Bar and Novell neglected to inform them.
Before Raymond Novell started handling their business and family affairs, the Stueve brothers had a combined wealth of over $50,000,000.00. The Stueves, having a family estate of considerable value through decades of hard work in the dairy business, wanted only to ensure that their family estate could be organized and managed so as to: first, provide income to fund the relatively modest living expenses the family members; and secondly, to funnel any assets remaining in the estate upon each member's death to the family's various charitable interests.
Novell with attorneys Jennifer Novell Miller and J. Wayne Allen approached the Stueve family with dire warnings of impending tax liability that would wipe out most of the estate, and thereby deprive them of the ability to meet the above-stated goals, upon the death of one or more of the senior Stueve brothers. Given the family's long-standing relationship with Novell, which begain when he was in grade school, the Stueves trusted Novell and took his warnings very seriously. The family looked to Novell for advice on how best to position the estate in order to ensure that their estate planning goals could be met.
Novell informed the Stueves that the estate was "cash poor" and would not have enough money available to pay that tax burden without liquidation of its various assets for amounts substantially below their fair market value. Novell warned the Stueves that, as a result of those impending tax burdens, and without an immediate and comprehensive restructuring of the family's estate plan, the estate would not retain sufficient value to meet the family's goals of providing lifetime support for the Stueve children and grandchildren and funding for their considerable charitable interests.
Novell, Allen and Novell Miller advised the Stueve family that this onerous tax burden could be avoided and the family's estate planning and charitable goals realized through implementation of a complex plan requiring the establishment of various irrevocable trusts and formation of various charitable foundations.
For assistance with a complex family estate scheme for the Stueve family, yet in actuality was designed to enrich Novell and his family and his associates, Novell enlisted the help of various other individuals and entities, whom he at one point has described as a "team of wealth management specialists." Novell's "team" at various points in time included, but was not necessarily limited to, attorney Wayne Allen, his daughters, attorney Jennifer Novell Miller and real estate agent Maggie Novell, and his wife, Helen Mouat, a former CFO of a public company.
Novell and his team of conspirators are believed to have taken over $15,000,000 in loans and over $3,000,000 in fees. The team has formed foundations and funneled money to themselves by making loans to themselves, to Novell‚ ¨!"s daughters and Novell‚ ¨!"s wife and several businesses that Novell had started while charging trustee fees, and also charging hefty management fees and commissions.
In total, Novell is alleged to have converted, looted, and lost over $50,000,000.00 of the Stueve family fortune.
Mortgage Fraud in Beverly Hills
By Alison Rogers CBS MONEYWATCH | Aug 11, 2009 | 0 Comments
It’s natural, as a seller, to want to feel smart. You want to sell your home for more than you paid for it — lots more — and if the market doesn’t co-operate, it would be nice to at least project the appearance of success.
However, inflating the price at which you’ve sold your house — which may look like a victimless crime — is actually mortgage fraud, and it’s illegal. What’s more, money that’s lied about comes out of somebody’s pocket, as a case from U.S. District Court this week shows.
Kyle Grasso, a former agent with Prudential California Realty, was found guilty on multiple counts of conspiracy, bank fraud, and loan fraud, according to an article by Peter Y. Hong in the Los Angeles Times. Also convicted was licensed appraiser Lila Rizk, who helped inflate the values of some California houses. Acquitted was Grasso’s partner Joseph A. Babajian. According to the Times, Grasso and Babajian worked in exalted circles, counting as clients David Beckham and Oscar de la Hoya (who weren’t part of the fraud).
Ralph Roberts at Realty Times has the best explanation of how the fraud worked, A ring basically bought homes at one price and then told lenders that they’d bought the homes at a higher price — to pull out more mortgage money, which of course got spent. The fake higher price was entered in the Multiple Listing Service, making you feel like a chump if you checked the home on Zillow and wondered how that seller was smart enough to beat the market.
I tried to flip houses in New Jersey in 2005-2006, partly on the strength of stories like this, and nearly went broke doing it. (Dear hubby, let me just say again that I’m sorry!) At the time, I thought I was a moron for not being able to duplicate these kinds of results — and now I feel a little bit vindicated to know that they were built on a foundation of lying, cheating, and stealing.
The real victim, though, is you. Some $142 million was borrowed from the lenders, with $40 million being lost … the name bank here being Lehman Brothers. You know who’s paying for that.
It’s natural, as a seller, to want to feel smart. You want to sell your home for more than you paid for it — lots more — and if the market doesn’t co-operate, it would be nice to at least project the appearance of success.
However, inflating the price at which you’ve sold your house — which may look like a victimless crime — is actually mortgage fraud, and it’s illegal. What’s more, money that’s lied about comes out of somebody’s pocket, as a case from U.S. District Court this week shows.
Kyle Grasso, a former agent with Prudential California Realty, was found guilty on multiple counts of conspiracy, bank fraud, and loan fraud, according to an article by Peter Y. Hong in the Los Angeles Times. Also convicted was licensed appraiser Lila Rizk, who helped inflate the values of some California houses. Acquitted was Grasso’s partner Joseph A. Babajian. According to the Times, Grasso and Babajian worked in exalted circles, counting as clients David Beckham and Oscar de la Hoya (who weren’t part of the fraud).
Ralph Roberts at Realty Times has the best explanation of how the fraud worked, A ring basically bought homes at one price and then told lenders that they’d bought the homes at a higher price — to pull out more mortgage money, which of course got spent. The fake higher price was entered in the Multiple Listing Service, making you feel like a chump if you checked the home on Zillow and wondered how that seller was smart enough to beat the market.
I tried to flip houses in New Jersey in 2005-2006, partly on the strength of stories like this, and nearly went broke doing it. (Dear hubby, let me just say again that I’m sorry!) At the time, I thought I was a moron for not being able to duplicate these kinds of results — and now I feel a little bit vindicated to know that they were built on a foundation of lying, cheating, and stealing.
The real victim, though, is you. Some $142 million was borrowed from the lenders, with $40 million being lost … the name bank here being Lehman Brothers. You know who’s paying for that.
Iranian-Americans Targeted In Beverly Hills Investment- And Affinty-Fraud Scheme, SEC Says; Debentures Program Allegedly Pitched On Persian-Language Radio Show
By PatrickPretty.com 2:56 p.m. Jan. 11, 2010
UPDATED 7:03 P.M. ET (U.S.A. JAN. 12) A Beverly Hills radio host pitched his fraud scheme in Persian and targeted Iranian-Americans in Greater Los Angeles, the SEC said today.
Client funds were used to build a mansion for John Farahi, 52, and and his wife, Gissou Rastegar Farahi, 50, the agency said. Client funds also were transferred to the Farahi Family Trust. John Farahi hosts the daily radio program.
Named defendants in the case were the Farahis, Beverly Hills-based NewPoint Financial Services Inc. and Elaheh Amouei, 54. The SEC identified Amouei as NewPoint’s controller and the “personal bookkeeper” of the Farahis.
A company named Triple “J” Plus LLC operated by John Farahi was named a relief defendant. John and Gissou Farahi have control over the Triple “J” bank accounts, the SEC said.
“They lured victims with false promises of investment safety while secretly enriching themselves and diverting investor funds for their personal use,” said Rosalind R. Tyson, director of the SEC’s Los Angeles Regional Office.
All of the defendants’ assets have been frozen in the case, which includes allegations that clients were told they were investing in FDIC-insured certificates of deposit, government bonds or corporate bonds issued by companies backed by funds from the Troubled Asset Relief Program (TARP).
TARP is the $700-billion program operated by the Treasury Department to shore up banks.
“The vast majority of the money raised was transferred to accounts held by Defendants John and Gissou Farahi,” the SEC said in its complaint. “John and Gissou Farahi, in tum, used the investor funds to, among other things, construct a multi-million dollar personal residence in Beverly Hills, California and to engage in risky options futures trading in the stock market in which . . . John and Gissou Farahi lost more than $18 million in 2008 and the beginning of 2009.”
Investors were asked to invest in the debentures by the Farahis and/or Elaheh Amouei, NewPoint’s controller, after making an appointment to discuss investment opportunities offered by NewPoint, the SEC said.
Since at least 2003, NewPoint has sold more than $20 million worth of debentures to more than 100 investors. Clients were told their investments were low-risk, the SEC said.
At some point, NewPoint prepared Private Placement Memoranda (PPM) literature describing the opportunity as high risk, but most investors said they never received the material, the SEC said. Investors also did not know that they were making loans to John Farahi.
“[N]ot only did Defendants John and Gissou Farahi and/or Defendant Amouei fail to provide the PPMs to most investors, it appears that they only added the disclosure regarding loans to Defendant John Farahi in 2009, after the offering ceased, the SEC said.
“[T]he vast majority of the money raised was actually transferred to accounts controlled by the Farahis, including an account at relief defendant Triple ‘J,’” the SEC said.
Beginning roughly in June 2009, the SEC said, John Farahi and Amouei “made further misrepresentations to investors in an effort to lull them into keeping their money with NewPoint.
“Investors have allegedly been told that their money is safe and that they are guaranteed to get the entirety of their investment back — despite the fact that NewPoint lacks sufficient funds to make all investors whole,” the SEC said. “John Farahi has also paid back some investors on a selective basis while failing to return money to other investors who have asked for a return of their investment.”
Amouei, accordring to the SEC, “falsely told some of the investors who have not received a return of their investment that NewPoint was unable to return their money because the Commission has frozen NewPoint’s financial accounts.”
The NewPoint case in California became the second fraud case since November in which a radio show allegedly was used to pitch a fraudulent investment program.
Christian radio host Pat Kiley of Minnesota was accused by the SEC and the CFTC in November of promoting a $190 million Ponzi scheme with Trevor Cook, who reportedly used some of the proceeds to buy a submarine to access a private island he bought in Canada.
UPDATED 7:03 P.M. ET (U.S.A. JAN. 12) A Beverly Hills radio host pitched his fraud scheme in Persian and targeted Iranian-Americans in Greater Los Angeles, the SEC said today.
Client funds were used to build a mansion for John Farahi, 52, and and his wife, Gissou Rastegar Farahi, 50, the agency said. Client funds also were transferred to the Farahi Family Trust. John Farahi hosts the daily radio program.
Named defendants in the case were the Farahis, Beverly Hills-based NewPoint Financial Services Inc. and Elaheh Amouei, 54. The SEC identified Amouei as NewPoint’s controller and the “personal bookkeeper” of the Farahis.
A company named Triple “J” Plus LLC operated by John Farahi was named a relief defendant. John and Gissou Farahi have control over the Triple “J” bank accounts, the SEC said.
“They lured victims with false promises of investment safety while secretly enriching themselves and diverting investor funds for their personal use,” said Rosalind R. Tyson, director of the SEC’s Los Angeles Regional Office.
All of the defendants’ assets have been frozen in the case, which includes allegations that clients were told they were investing in FDIC-insured certificates of deposit, government bonds or corporate bonds issued by companies backed by funds from the Troubled Asset Relief Program (TARP).
TARP is the $700-billion program operated by the Treasury Department to shore up banks.
“The vast majority of the money raised was transferred to accounts held by Defendants John and Gissou Farahi,” the SEC said in its complaint. “John and Gissou Farahi, in tum, used the investor funds to, among other things, construct a multi-million dollar personal residence in Beverly Hills, California and to engage in risky options futures trading in the stock market in which . . . John and Gissou Farahi lost more than $18 million in 2008 and the beginning of 2009.”
Investors were asked to invest in the debentures by the Farahis and/or Elaheh Amouei, NewPoint’s controller, after making an appointment to discuss investment opportunities offered by NewPoint, the SEC said.
Since at least 2003, NewPoint has sold more than $20 million worth of debentures to more than 100 investors. Clients were told their investments were low-risk, the SEC said.
At some point, NewPoint prepared Private Placement Memoranda (PPM) literature describing the opportunity as high risk, but most investors said they never received the material, the SEC said. Investors also did not know that they were making loans to John Farahi.
“[N]ot only did Defendants John and Gissou Farahi and/or Defendant Amouei fail to provide the PPMs to most investors, it appears that they only added the disclosure regarding loans to Defendant John Farahi in 2009, after the offering ceased, the SEC said.
“[T]he vast majority of the money raised was actually transferred to accounts controlled by the Farahis, including an account at relief defendant Triple ‘J,’” the SEC said.
Beginning roughly in June 2009, the SEC said, John Farahi and Amouei “made further misrepresentations to investors in an effort to lull them into keeping their money with NewPoint.
“Investors have allegedly been told that their money is safe and that they are guaranteed to get the entirety of their investment back — despite the fact that NewPoint lacks sufficient funds to make all investors whole,” the SEC said. “John Farahi has also paid back some investors on a selective basis while failing to return money to other investors who have asked for a return of their investment.”
Amouei, accordring to the SEC, “falsely told some of the investors who have not received a return of their investment that NewPoint was unable to return their money because the Commission has frozen NewPoint’s financial accounts.”
The NewPoint case in California became the second fraud case since November in which a radio show allegedly was used to pitch a fraudulent investment program.
Christian radio host Pat Kiley of Minnesota was accused by the SEC and the CFTC in November of promoting a $190 million Ponzi scheme with Trevor Cook, who reportedly used some of the proceeds to buy a submarine to access a private island he bought in Canada.
Hedge-Fund Manager With ‘Great Tan’ And Porsche ‘Getaway Car’ Sentenced To Decade In Prison For Ponzi Scheme; Judge Scolds Bradley L. Ruderman At Sentencing
By patrickpretty.com 10:22 p.m. Jan. 12, 2010
After Bernard Madoff’s Ponzi scheme was exposed in December 2008, Beverly Hills hedge-fund manager Bradley L. Ruderman wrote a letter to clients assuring them them their money was safe and deploring Madoff’s “chicanery,” federal prosecutors in the Central District of California said.
“[S]uch disgraceful practices will never happen under my watch,” Ruderman declared in the letter.
Less than five months later — on April 28, 2009 — the SEC charged Ruderman, 46, with defrauding investors and lying about his Ruderman Capital Partners and Ruderman Capital Partners “A” hedge funds.
Ruderman had falsely told investors that Lowell Milken, chairman of the Milken Family Foundation and Michael Milken’s younger brother, and Larry Ellison, chief executive officer of Oracle Corp., invested with him, the SEC said.
And “Ruderman falsely told investors that the hedge funds had earned positive returns from 15% to 60% per year and had over $800 million in assets,” the SEC said. “In reality, the hedge funds lost money and had less than $650,000 in assets.”
Criminal charges followed in May 2009. In August 2009, Ruderman pleaded guilty to two counts of wire fraud, two counts of investment adviser fraud and one count of not filing a tax return for 2007, a year in which he earned $2 million.
He was sentenced yesterday, and U.S. District Judge John F. Walter admonished Ruderman.
“He stole from individuals he knew for many years, who cared about him, had invited him into their homes and shared meals with him, who had known him since he was a child,” Walter said.
Ruderman family members and friends lost $25 million in the scheme, prosecutors said.
When Ruderman wrote the letter assuring investors he was no Madoff and that their accounts were safe, the judge said, “he was stealing their money.”
After hearing a statement from a victim that Ruderman was no different than a convenience-store thief or bank robber except he had “committed his crimes with manicured nails, a great tan, wearing an Armani suit and the getaway car was a Porsche that his victims all paid for,” Walter sentenced Ruderman to 121 months in federal prison.
Given the recent “staggering increase” in investor-advisor frauds, Walter said, he wanted to “send a message that these crimes will result in significant prison sentences.”
FBI agents who reverse-engineered the crime determined Ruderman had lost “$5.2 million of investor money in clandestine poker games held on a regular basis in a suite at a luxury Beverly Hills hotel.”
Meanwhile, the investigation revealed that Ruderman, like Madoff, had sent investors bogus account statements. At the same time, it revealed he had spent had spent at least “$8.7 million of investor money on personal expenses, including $200,000 each summer for a rented beach house in Malibu, two Porsches, $53,930 on sporting events, $896,000 in credit card charges and $327,000 in cash expenditures.”
Walter ordered Ruderman to pay nearly $26 million in restitution to victims. The FBI and IRS conducted the criminal probe.
After Bernard Madoff’s Ponzi scheme was exposed in December 2008, Beverly Hills hedge-fund manager Bradley L. Ruderman wrote a letter to clients assuring them them their money was safe and deploring Madoff’s “chicanery,” federal prosecutors in the Central District of California said.
“[S]uch disgraceful practices will never happen under my watch,” Ruderman declared in the letter.
Less than five months later — on April 28, 2009 — the SEC charged Ruderman, 46, with defrauding investors and lying about his Ruderman Capital Partners and Ruderman Capital Partners “A” hedge funds.
Ruderman had falsely told investors that Lowell Milken, chairman of the Milken Family Foundation and Michael Milken’s younger brother, and Larry Ellison, chief executive officer of Oracle Corp., invested with him, the SEC said.
And “Ruderman falsely told investors that the hedge funds had earned positive returns from 15% to 60% per year and had over $800 million in assets,” the SEC said. “In reality, the hedge funds lost money and had less than $650,000 in assets.”
Criminal charges followed in May 2009. In August 2009, Ruderman pleaded guilty to two counts of wire fraud, two counts of investment adviser fraud and one count of not filing a tax return for 2007, a year in which he earned $2 million.
He was sentenced yesterday, and U.S. District Judge John F. Walter admonished Ruderman.
“He stole from individuals he knew for many years, who cared about him, had invited him into their homes and shared meals with him, who had known him since he was a child,” Walter said.
Ruderman family members and friends lost $25 million in the scheme, prosecutors said.
When Ruderman wrote the letter assuring investors he was no Madoff and that their accounts were safe, the judge said, “he was stealing their money.”
After hearing a statement from a victim that Ruderman was no different than a convenience-store thief or bank robber except he had “committed his crimes with manicured nails, a great tan, wearing an Armani suit and the getaway car was a Porsche that his victims all paid for,” Walter sentenced Ruderman to 121 months in federal prison.
Given the recent “staggering increase” in investor-advisor frauds, Walter said, he wanted to “send a message that these crimes will result in significant prison sentences.”
FBI agents who reverse-engineered the crime determined Ruderman had lost “$5.2 million of investor money in clandestine poker games held on a regular basis in a suite at a luxury Beverly Hills hotel.”
Meanwhile, the investigation revealed that Ruderman, like Madoff, had sent investors bogus account statements. At the same time, it revealed he had spent had spent at least “$8.7 million of investor money on personal expenses, including $200,000 each summer for a rented beach house in Malibu, two Porsches, $53,930 on sporting events, $896,000 in credit card charges and $327,000 in cash expenditures.”
Walter ordered Ruderman to pay nearly $26 million in restitution to victims. The FBI and IRS conducted the criminal probe.
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