Anthony Vassallo of Folsom pleaded guilty last week to ripping off 300 investors for more than $80 million in a Ponzi scheme built around his hedge fund, Equity Investment, Management, and Trading Inc. He ran the scam that guaranteed 36% returns to investors from 2006-2009.
Ponzi schemes are characterized by their recruitment of investors, whose money is then used to pay off previous “investors,” rather that placed in profitable, income-generating enterprises. They are named after Charles Ponzi, a legendary scam artist of the early 20th century.
Vassallo will certainly be near the head of the 2013 class of California Ponzi schemers brought to justice, joining B-movie producer Mahmoud Karkehabadi, who was convicted two weeks ago by an Orange County jury on 51 felony counts of securities fraud and grand theft. Karkehabadi, raised a reported $11 million from hundreds of people.
Those cases represent an auspicious beginning to a new year of scams, shams and sleight-of-hands that promises to be the equal of 2012. The following are a list of notable California-based Ponzi schemers who had their day in court last year.
Class of 2012
1. International Man of Mystery: William Wise, a Canadian who operated across borders, pleaded guilty to 18 felonies in September for running multiple scams investing in supposedly lucrative offshore projects. He was allegedly assisted by Napa native Jacquline Hoegel, also known as Kristi M. Hoegel. Estimated loss: $125 million
2. Fake Mad Man: Dean P. Gross received a seven-year sentence after accepting a plea agreement last August for bilking 39 investors in his phony media business, Bridon Entertainment. Gross was done in with the help of an FBI informant who has a long list of questionable activities on his own resume: famed scammer Barry Minkow. Minkow has worked with the Securities and Exchange Commission (SEC) on about two dozen Ponzi scams in between serving jail time for running his own scams. Estimated loss: $35 million
3. The Disneyland Milk Caper: Maricela Barajas, Juliana Menefee and Eva Perez of Southern California recruited 30 people from the local Parent Teacher Association (PTA) to participate in an “exclusive” deal to sell milk to Disneyland. Their sentences in April ranged from three to 13 years in prison. Estimated loss: $14 million
4. Scam on the Run: John Chiyuan Lee, who was dragged back home by U.S. Marshals after fleeing to Taiwan and then Thailand when his 29-victim Ponzi scheme collapsed, accepted a plea deal in April that netted him a six-year sentence. Estimated loss: $1.9 million
5. Guarding the Hen House: Retired Colonel Timothy Melvin Murphy, former Los Alamitos commander for the California National Guard, pleaded guilty to mail fraud in April. His investment scam, run through Capital Investors Inc., bilked 28 investors. Estimated loss: $2.7 million
6. Deaf Christians: Marc Perlman, who specialized in ripping off deaf Christians, lost a default judgment in the U.S. District Court for the Southern District of New York after the U.S. Commodity Futures Trading Commission (CFTC) charged him and his company, iGlobal Strategic Management, LLC, with defrauding 17 people. Estimated loss: $670,000
7. “Sour Lollipop”: Steven Bartko received a two-year sentence for luring 30 investors to his Starfire Technologies, which purported to sell circuit boards and other electronic parts to government contractors. One victim likened the sentence, which he considered a tad light, to little more than a “sour lollipop” that would provide no deterrence to other scammers. Estimated loss: $6.8 million
8. Unreal Estate: San Fernando Valley real estate agent Celia Gallardo pleaded guilty in September to ripping off dozens of investors in her scheme to buy condominiums in other states. She promised yields as high as 100% in only 30 days. Estimated loss: $2.2 million
9. Risky Option: Saratoga attorney David Boyer Prince was sentenced last February to seven years in prison for defrauding more than 30 people. He promised to conservatively invest their money in his MJE Invest! and Leopard Fund, but after blowing it on risky options trading, he used new investments to pay older investors. Estimated loss: $1.2 million
10. Fabrication, Inc: David Lincoln Johnson, former president of Genetech Fabrication, Inc. in Chino, was sentenced to 168 months in prison last July for working with two partners to lure investors, in part, my misrepresenting Genetech as having lucrative government contracts. Estimated loss: $16 million
–Ken Broder
To Learn More:
California Man Pleads Guilty in $80 Million Ponzi Scheme (by Joel Rosenblatt, Bloomberg)
California Man Pleads Guilty to $80 Million Ponzi Scheme (Federal Bureau of Investigation)