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Financial Scandals – Shapiro Family Boston

Boston Money — Sun, 19 Jul 2009 03:22:47 +0000

Uneasy times for the Shapiro family

Ties to Madoff could spur effort to recover investment gains

Ruth and Carl Shapiro, in an undated photo. (The Nourses)

By Beth Healy and Steven Syre Globe Staff / July 6, 2009

Eleven days ago, while Bernard Madoff was in a Manhattan jail cell awaiting his 150-year sentence, his old friend Carl Shapiro was enjoying a family dinner at the Four Seasons in Boston. He and his wife, Ruth, were celebrating their 70th wedding anniversary with their children and grandchildren at the luxury hotel, where they often dine.

The festive affair belied the uneasy times for the Shapiro family. Three days before attending the party, Shapiro son-in-law Robert Jaffe was accused by federal regulators of delivering $1 billion in client funds to Madoff, reaping $150 million in improper payments in return. Jaffe denies the charges.

Shapiro, who has lost at least $545 million to Madoff, is one of numerous large investors who are under investigation by US authorities.

And now, as a client who has known Madoff for five decades, Shapiro has to worry if the court-appointed trustee recovering funds for victims will try to seize any profits he or his charitable foundation received from him over the years, as the trustee has sought to do with other large clients.

“There’s a significant risk for people who had substantial accounts for many, many years, who were looking at the supposed performance regardless of what the market was doing and seeing gains year after year,’’ said Boston attorney Harry Miller, who represents a number of Madoff victims. “The trustee is going to take the position that they should have known, and could hold them responsible for that.’’

And if regulators determine he received unusually large returns over his many years with Madoff, the consequences could be tougher still.

Irving Picard, the Madoff bankruptcy trustee, is pursuing a number of large investors for “clawbacks,’’ or demands they return profits from Madoff because the money, in effect, belonged to other investors.

He is limited to the past six years of gains; the Securities and Exchange Commission has no time limit on how far back it can go to recover what it calls “ill-gotten gains.’’

Picard and the Shapiros have not commented on whether the family has received a clawback demand.

In some ways, life continues as usual for two of the men closest to the Wall Street swindler. They have returned from Palm Beach to the Boston area for the summer, as they typically do. There was the recent wedding of the Jaffes’ son Steven, and they recently attended the bar mitzvah of the child of some friends.

But in other ways, life is changing in ways big and small. Jaffe will not be a regular at the Pine Brook Country Club in Weston this season; he’s taken a year off from the golf club “for financial reasons,’’ his spokesman said.

Meanwhile, Shapiro, 96, has been pained to see a large part of his personal fortune wiped out, along with half of the charitable foundation that has donated in his family’s name to hospitals, art museums, and schools in Greater Boston and Palm Beach. He has said he was as shocked as anyone by the scandal.

The Shapiros have donated $196 million to the Carl and Ruth Shapiro Family Foundation over the past decade, according to the foundation’s tax records filed through 2007. More than half of that, $111.5 million, was donated in 2007.

The family uses another entity to sometimes direct contributions to the foundation: Wellesley Capital Management Inc., which accounted for $49 million of the donations during the 10-year period. The firm was established in 1975 to handle tax and accounting services for the family fortune and keeps the books for the foundation, according to tax records and state filings. It is also listed as a client on Madoff customer lists.

Through a spokesman, the Shapiros declined to say if the money they gave the foundation came from Madoff or other sources.

Last week, a Shapiro family confidant who asked to remain anonymous confirmed that both the US attorney in New York and the bankruptcy trustee are examining Shapiro’s investments with Madoff.

Wellesley Capital did not have oversight of Shapiro investments, said the family spokesman, Elliot Sloane, but is a “bookkeeping and accounting office serving the needs of the Shapiro family investments.’’ It has a small staff, and its officers are Shapiro’s three daughters: Linda Waintrup, listed as president; Rhonda Zinner, and Ellen Jaffe, Robert’s wife.

On Madoff’s customer list – flawed and error-ridden though it is – no entity is mentioned more times than Wellesley Capital Management. The firm, or the address and suite number of its office, appears 129 times, with clients that include Shapiro family trusts and two of the Jaffes’ sons.

Other investors with longtime relationships with Madoff also appear multiple times on the list: Jeffrey and Barbara Picower and their foundation, which Picard has alleged took billions more in money out of Madoff accounts than they put in, show up 10 times, and New York money manager Ezra Merkin, who funneled $2.4 billion in client money to Madoff, shows up eight times. Stanley Chais, the Beverly Hills money manager charged with fraud by the Securities and Exchange Commission, is listed 68 times.

One possible explanation for the large number of Shapiro family accounts on the client list is that Carl Shapiro’s relationship with Madoff dates back to the 1960s.

People who know Shapiro said he thought of Madoff as a son. In the days before the collapse of his scheme in December, Madoff asked Shapiro for $250 million, which his friend gave him. Shapiro learned of Madoff’s confession on the television news, say people who know him.

Known for an exacting attention to detail, Shapiro has kept a firm hand in the workings of his charity and his finances, according to people who know the family. He takes a personal interest in many of the nonprofits the foundation funds. He set up Wellesley Capital rather than hire an outside firm to manage his affairs. And for years he used a New York accounting firm run by a friend of Madoff’s to prepare the foundation’s taxes, which often were filed late.

The question many are asking is this: How could Shapiro or other Madoff investors have failed to see that something was amiss when they received returns that beat the market so consistently?

Miller said part of the answer lies in human nature. “If things were really good, you might look the other way and not look into what was going on,’’ he said.

It appears the Shapiros are cutting their Madoff ties one by one. The foundation has fired the accounting firm Konigsberg Wolf & Co., the family’s spokesman said.

Neither Shapiro nor Jaffe attended Madoff’s court appearances, nor did they submit character references to the judge who sentenced Madoff.

Indeed, not a single person did so on his behalf.

Beth Healy can be reached at bhealy@globe.com. Steven Syre can be reached at syre@globe.com.

Financial Planner Matthew Weitzman – Fraud

Boston Money — Sat, 13 Jun 2009 15:11:06 +0000

An Adviser (Mine) Is Charged With Fraud

By RON LIEBER

Ron Lieber New York Times

About two months ago, I wrote a column about how Matthew Weitzman, our family’s financial planner, was under investigation for reportedly siphoning money from clients’ accounts.

Well, the ax finally fell on Wednesday. The Securities and Exchange Commission accused him of looting client accounts of at least $6 million and using them “as his personal piggy bank.” It accused him of spending the money he took on a multimillion-dollar home, luxury cars and a share in a horse. Mr. Weitzman agreed to settle the claims without admitting or denying the accusations, though the S.E.C. is unsure about how much money his clients will get back.

Meanwhile, the United States attorney’s office for the Southern District of New York, along with the Federal Bureau of Investigation, also unsealed charges against Mr. Weitzman. They include fraud, lying to investors and converting money for his own use. Some of the charges carry maximum penalties of 20 years in prison and a $5 million fine.

Mr. Weitzman declined to comment on the charges and hung up on me. His lawyer, Marc Mukasey, said he was reviewing the accusations and declined to comment further.

Sure, fraud happens. Yes, people steal. But the S.E.C. complaint paints a picture of a man set on aiming at the vulnerable. The complaint lists a roster of victims, including an elderly couple with compromised mental capabilities; a 24-year-old law student who had inherited $1 million from her parents; and Mr. Weitzman’s own father-in-law, who may be out $3 million.

Patricia Flinn, a Brewster, N.Y., resident and a former client of Mr. Weitzman’s, met him when her husband was told, six months after they had married, that he had cancer. “He told Matt that he wanted to be sure that his wife would be taken care of.”

As her husband, William Adcock, lay dying, however, Mr. Weitzman helped himself to Mr. Adcock’s money, including one withdrawal on the day that Mr. Weitzman served as a witness when Mr. Adcock changed his will, Ms. Flinn said. After he died, Mr. Weitzman began taking Ms. Flinn’s money instead, she recalled. According to the government charges, he usually used forms with forged signatures to wire money from client accounts at Charles Schwab to an account that he controlled.

A Schwab spokesman said it had intensive controls in place to prevent this problem, but declined to elaborate for fear of tipping off potential offenders.

Ms. Flinn said she did not notice the withdrawals until Schwab representatives and Mr. Weitzman’s former business partner alerted her to the problems. “I never opened my husband’s mail,” she said. “I was in the hospital every day for three months. I was preoccupied with Bill’s health.”

A few peers of Mr. Weitzman in the financial planning world have accused me of hammering away at this because of my personal involvement. They’ve got it wrong. The reason this is, in many ways, more important than the Bernard Madoff scheme is that Mr. Weitzman’s clients were merely upper middle class. You didn’t have to be famous or play golf at the right clubs to work with Mr. Weitzman.

So most readers of this newspaper could be victims in other similar situations. I almost was. Your parents or grandparents might be vulnerable. It is hard to guard against outright theft or fraud, but you can at least read your statements carefully to watch out for it.

And if you have family members who are old, infirm or ill-informed, read the statements for them. The odds of someone trying to steal may well be highest when his victims are paying the least amount of attention.

If you know Mr. Weitzman, please get in touch with me at rlieber@nytimes.com.

Grand Jury Indicts Sal DiMasi

Boston Money — Thu, 04 Jun 2009 05:57:52 +0000

Grand jury indicts DiMasi

Contract fraud alleged

By John J. Monahan TELEGRAM & GAZETTE STAFF
jmonahan@telegram.com

BOSTON – Former House Speaker Salvatore F. DiMasi allegedly received secret payments totaling $57,000 and could face up to 145 years in prison for his role in a conspiracy to illegally secure multimillion-dollar state contracts for a computer software company, according to a federal grand jury fraud indictment.

Mr. DiMasi, 64, who resigned in January amid earlier reports of the contract scandal, was released yesterday on $10,000 bond after appearing in federal court with three associates. Each faces one count of conspiracy, three counts of federal mail fraud, and four counts of federal wire fraud.

Sal Dimasi Fraud Charges

Indicted on the same charges, and appearing with Mr. DiMasi before federal magistrate Judge Robert B. Collings, were Richard D. Vitale, 64, of Boston, Mr. DiMasi’s former accountant and longtime friend; Richard W. McDonough, 64, of Foxboro, a Beacon Hill lobbyist and close associate of Mr. DiMasi; and Joseph P. Lally, 48, of North Reading, a one-time vice president of Cognos ULC, who more recently worked as a licensed reseller of the company’s software. Mr. Lally is also charged with one count of money laundering.

Each of the mail and wire fraud charges carry penalties up to 20 years in prison, a $250,000 fine and a subsequent five years supervised release. The conspiracy charge carries penalties up to five years plus three years supervised release and a $250,000 fine. Mr. Lally also faces an additional 10 years in prison if convicted of the laundering charge.

The indictment alleges the four devised a long-running scheme that began in late 2004 and continued through early 2007, in which they conspired to use Mr. DiMasi’s power and influence to direct two multimillion-dollar state computer software contracts to Cognos, with all four men receiving large sums of money for their roles.

While legislators, state officials and the public were aware of the ongoing investigation since early last year, the extent and brazen nature of the scheme detailed in the indictment released yesterday stunned Beacon Hill officials.

Gov. Deval L. Patrick called the charges “deeply disturbing” and said they constitute “a very serious breach of the public trust” that will be difficult to overcome.

“I think we all have to acknowledge how deeply troubling these charges are. All of us who work in this building have to redouble our efforts to restore the publics confidence in our, and the state government’s ability, to do the public’s business, the people’s business,” he said last night.

Republican House Minority Leader Bradley H. Jones Jr. said one-party rule of the state is to blame for “the dark shadow (that) continues to hover over Beacon Hill.”

“When one party controls the Legislature by such a vast majority, the door is left wide open for corruption, abuse of power and scandal,” he said.

Outside the courthouse yesterday, Mr. DiMasi refused to discuss details, but said, “Every decision that I have ever made as the speaker or a state representative was always made in the best interest of my constituents and the people of Massachusetts.”

His lawyer, Thomas Kiley, said he would prove his innocence in court.

“He has never, ever broken the trust of the people of the commonwealth,” Mr. Kiley said.

Thomas Drechsler, a lawyer representing Mr. McDonough, said his client legitimately lobbied for Cognos and was well within his First Amendment rights in all of his activities. “I really feel strongly this is an attack on the lobbying profession,” Mr. Drechsler said, adding his client denies any wrongdoing.

The four men are scheduled to be arraigned June 8.

According to the indictment, from March 2005 through early 2007, Mr. Lally, Mr. McDonough and Mr. DiMasi arranged to have regular payments made to Mr. DiMasi from Cognos for the speaker to use his power to secure contracts for Cognos.

Starting in April 2005, a series of monthly payments of $5,000 each from Cognos were made to a lawyer who shared a private practice law office with Mr. DiMasi, as an attorney retainer fee. Of those funds, $4,000 of each of the payments directed by Mr. Lally were given to Mr. DiMasi, supposedly as a client referral fee.

At the time the arrangement was set up, the indictment alleges, Mr. DiMasi agreed to it, saying, “It’s about time we got business like this.”

It alleges Mr. DiMasi asked to get $4,000 of every $5,000 check paid to the lawyer and that Mr. DiMasi received checks from the lawyer of $4,000 on six occasions between April and November 2005 as well as one check for $8,000. On another occasion after Cognos’ payments were interrupted, Mr. DiMasi allegedly instructed the lawyer to check with Mr. McDonough to find out why, which he did.

A short time later, Mr. Lally sent an e-mail to a Cognos executive asking him to look into the situation “fast,” adding, “We don’t want to piss anyone off this late in the game.”

The next day Cognos sent a $25,000 check to the lawyer and a short time later Mr. DiMasi told the lawyer he wanted all of that check. The lawyer then wrote and mailed a $25,000 check to Mr. DiMasi.

On Dec. 28, 2006, Mr. DiMasi instructed the lawyer to replace the check with four backdated checks in amounts of $8,000, $7,000, $6,000 and $4,000, “to further disguise the payments as typical referral fees,” which he did, according to the federal allegations.

Meanwhile, the four were arranging two large contracts for Cognos to provide the state with software.

In 2006, Mr. DiMasi had a $5.2 million budget amendment introduced and facilitated its final passage for the purchase of an Education Data Warehouse and Reporting System for the Department of Education, with the amendment specifying not less than $4.5 million be spent on software.

Mr. DiMasi never disclosed his financial ties to Cognos, which received the contract from the department.

The contract resulted in the payment of $891,000 to Montvale Solutions, a company formed by Mr. Lally as a licensed reseller of Cognos products. Montvale Solutions then paid $100,000 to Mr. McDonough and $100,000 to Mr. Vitale’s company, WN Advisors, as consulting fees, the indictment alleges.

Then in 2007, Mr. DiMasi, using legislative language provided by Mr. Lally, Mr. McDonough and Mr. Vitale on behalf of Cognos, caused provisions to be made for a $15 million purchase of performance management software by the state Division of Administration and Finance. The purchase was later canceled by the state.

The indictment said they then used Mr. DiMasi’s influence to help Cognos secure the contract from the Division of Administration and Finance.

That contract resulted in payment of $2.8 million to Mr. Lally’s firm, which in turn paid $200,000 to Mr. McDonough and $500,000 to Mr. Vitale’s firm as consulting fees.

The indictment details numerous actions by Mr. DiMasi, Mr. McDonough and Mr. Lally to ensure the contracts were funded and awarded to Cognos.

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Sal DiMasi case rocks accounting co., IBM contract

By Jay Fitzgerald | Wednesday, June 3, 2009 | http://www.bostonherald.com | Business & Markets

Photo by Staff Graphic by Sarah Kaempfe

The Sal DiMasi scandal now rocking the State House is taking its toll on some prominent local and national firms.

The corruption case against DiMasi – the former House speaker who was indicted yesterday with three others tied to a shady software deal – centers around Cognos ULC, a Canadian company with a longtime presence in Burlington.

DiMasi and the three others effectively steered the state contracts to Cognos, the U.S. Attorney’s office charged yesterday.

Cognos is now a subsidiary of IBM Corp., which purchased Cognos after the multimillion-dollar contracts in question were issued in 2006 and 2007. IBM, whose spokesman could not be reached for comment, voluntarily rescinded one of the state contracts, valued at $13 million, after it officially took over Cognos last year.

Another company, Vitale Caturano, a prominent Charlestown accounting firm, changed its name earlier this year amid bad publicity surrounding one of its founders, Richard Vitale, who was indicted yesterday along with DiMasi.

Caturano & Co., which was not charged with anything and which apparently wasn’t aware of Vitale’s alleged Beacon Hill antics, declined comment yesterday.

Vitale, who left his old accounting firm in 2008, is in trouble on yet another front. He was indicted by the state for allegedly using his close relationship with DiMasi to push a House bill on behalf of the Massachusetts Association of Ticket Brokers to remove price caps on ticket reselling.

Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1176424

Financial Consultant Sandra Lynn Boss – “I thought he was a Rockefeller”

Boston Money — Tue, 02 Jun 2009 13:08:50 +0000

Ex testifies about the man she thought was a Rockefeller

Story Highlights
Ex-wife testifies at kidnapping trial of Rockefeller impostor
Sandra Boss says she was romanced by handsome stranger
Later, she says, he became controlling and short-tempered
Impostor is accused of kidnapping his daughter in July

By Beth Karas and Ann O’Neill
CNN/In Session

BOSTON, Massachusetts (CNN/In Session) — The former wife of a man accused of kidnapping their daughter told a jury Monday about the unraveling of her 12-year marriage to a man she thought was a member of the moneyed Rockefeller family.

Financial consultant Sandra Lynn Boss, 42, was stone-faced and repeatedly referred to her former husband as “the defendant” as she took the witness stand Monday at his kidnapping trial. She now lives in London, England, with the girl, Reigh, who just turned 8.

Clark Rockefeller

Her former husband, German-born Christian Karl Gerhartsreiter, 48, is accused of kidnapping their daughter in July, and taking the child to Baltimore, Maryland, where he’d bought a townhouse near the harbor. His trial began last week in Boston, Massachusetts.

Gerhartsreiter is charged with the kidnapping of a minor by a relative, assault and battery, assault with a dangerous weapon and furnishing a false name to a law enforcement officer. His defense attorneys told jurors they will present evidence that Gerhartsreiter was mentally ill.

As she began the narrative of their whirlwind romance and 12-year marriage, Boss described how she was charmed by a handsome stranger she knew as Clark Rockefeller, who was host of a party based on the mystery game Clue.

Boss testified that she came to the party dressed as the character “Miss Scarlet” and fell for him immediately during the summer of 1993, when she was a student at Harvard’s business school.

“I thought he was very attractive,” she testified. “He was very well dressed, very fit. I thought he was very polite and could talk about anything, and also very charming.”

She told jurors that the man she married in 1995 told her he grew up in a townhouse on Manhattan’s prestigious Sutton Place, that he had suffered amnesia and couldn’t speak after falling down a flight of stairs as a child, and that his parents had been killed in an accident when he was in college.

He also said he attended Yale University under an early admissions program when he was 14 and helped foreign governments renegotiate their debt. She believed it, she said, because “he was one of the most intelligent people” she’d met.

Boss said he proposed to her during the spring of 1994, during a trip to Maine. They were married in a Quaker ceremony on Nantucket soon after she graduated from business school. Only eight people attended — and not a single Rockefeller. Her new husband explained that he’d had a falling out with his family.

The newlyweds set up housekeeping in New York. During the early days of their marriage, she said, her husband was very supportive, but his demeanor soon changed. He became possessive and controlling, she said.

Later, he “began to show temper,” she said. “He wanted to walk me to and from work every day. He began to be less supportive of my seeing my friends,” she said. His criticism of her friends left her confused and in tears, she said.

By early 1996, she said, “It became a very stressful relationship from my point of view.” The couple moved to Nantucket, then to Woodstock, Vermont, then back to Nantucket before buying a house in Cornish, New Hampshire.

The marriage did not improve. By the summer of 2000, Boss said she was considering a separation. She spent more time in New York away from her husband, but he wooed her back.

In September, Boss learned she was pregnant and vowed to work at the marriage for the sake of their child. Their daughter, Reigh, was born in May 2001.

After hiring two nannies, Gerhartsreiter said he could do a better job and became the primary caretaker. In September 2004, Boss transferred to her company’s Boston office to cut her commute time so she could spend more time with Reigh.

The marriage ultimately fell apart and the couple separated in January 2007. Boss had always been the sole income earner and said she began to doubt that her husband was really a Rockefeller.

She said she hired a private investigator who came up with little information about “Clark Rockefeller.” Shortly after that revelation, Gerhartsreiter agreed to give Boss full custody of Reigh. He received $800,000, two cars and her engagement ring.

Boss and Reigh moved to London in late December 2007. Gerhartsreiter did not respond to e-mails or calls from his daughter, Boss said, and never initiated contact with her during the first six months after she and her mother moved to London.

On July 27, 2008 — during the first of three annual supervised visits in Boston — Gerhartsreiter allegedly abducted his daughter, nicknamed “Snooks.”

Boss described reuniting with the child at the FBI field office in Baltimore after Gerhartsreiter’s arrest a week later. She said Reigh had lost weight and “seemed younger.”

Boss returns to the stand on Tuesday, when she will undergo cross-examination.

All AboutClark Rockefeller • Kidnapping

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Ryan Nestor Marblehead Wire Fraud

Boston Money — Tue, 10 Mar 2009 14:31:48 +0000

A Marblehead investment adviser who allegedly defrauded two of his elderly clients of a combined $750,000 was charged Monday with wire fraud.

Ryan Nestor, 32, formerly was registered with an affiliate of Mass Mutual, according to U.S. Attorney Michael Sullivan’s office, which brought the criminal case. He worked out of a Boston office.

Prosecutors said Nestor invested funds in what the government called a “massive ponzi scheme,” planning to keep some of the proceeds. His clients allegedly did not know how the money was being invested.

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Feds say adviser defrauded elderly clients

By Julie Manganis
Staff writer

MARBLEHEAD — An investment adviser from Marblehead has been charged with defrauding two elderly investors by putting their money in what prosecutors say turned out to be a massive Ponzi scheme.

Ryan Nestor, 32, was cited yesterday in a two-count information charging him with wire fraud.

Prosecutors say he defrauded the clients out of more than $750,000 by investing their money in a company that was later sued by the Securities and Exchange Commission.

Nestor, who runs a business called Harbor Point Capital LLC, was a former registered representative for a Mass Mutual-related business. Prosecutors allege that Nestor “misappropriated” the money by investing two clients’ funds in what turned out to be a massive Ponzi scheme, without the knowledge or consent of his clients.

The two clients live on Martha’s Vineyard. According to the information filed in U.S. District Court, Nestor, in April and May 2007, invested their money in a California-based company called AOB Commerce Inc., which purported to make loans to businesses in Asia.

Prosecutors allege that Nestor made investments on behalf of both clients, $170,000 for one client and $590,000 for the other in AOB by forging their signatures on authorizations to wire money from their accounts to a bank in California.

Nestor allegedly had an agreement with AOB under which he would receive a portion of the anticipated return on the investment.

A month later, in June 2007, the SEC sued AOB, alleging that it was basically a giant Ponzi scheme that used investor funds to pay other investors.

If convicted, Nestor could face up to 30 years in prison and a $1 million fine on each of the two counts.

Prosecutors are also seeing the forfeiture of Nestor’s home at 51 Bubier Road in Marblehead, which he purchased in 2007 for $725,000.

Generally, when prosecutors file an information, it means a defendant has waived his right to have the case presented to a grand jury for indictment.

His lawyer, Peter Krupp, said last night that Nestor “had no knowledge the investment he made on behalf of his clients was not legitimate. In fact, he invested and lost his own money in that investment.”

“Mr. Nestor has cooperated with the government throughout this investigation and deeply regrets the losses suffered by his clients,” Krupp went on to say.

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Wicked Local Marblehead

Marblehead – A Marblehead investment advisor was charged today with wire fraud in connection with a scheme to defraud two of his clients.

Ryan Nestor, 32, of Marblehead has been charged in a two-count information alleging that Nestor defrauded two investment clients out of more than $750,000, announced United States Attorney Michael J. Sullivan and Warren T. Bamford, special agent in charge of the Federal Bureau of Investigation Boston Field Division.

According to the information, Nestor, a former registered representative for a Mass-Mutual-related entity, misappropriated more than $750,000 in client funds by investing those funds, without the knowledge or consent of his two elderly victims, in an entity that turned out to be a massive Ponzi scheme. According to investigators, Nestor invested the client funds pursuant to an agreement whereby Nestor expected to receive a portion of the returns on the improper investments.

If convicted, Nestor faces up to 30 years in prison, followed by five years of supervised release and a $1,000,000 fine on each charge.

The Federal Bureau of Investigation Boston Field Division investigated this case. Assistant U.S. Attorney Sarah E. Walters of Sullivan’s Economic Crimes Unit is prosecuting it.

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Boston Herald

Marblehead advisor accused of misusing client funds

By Associated Press | Monday, March 9, 2009 | http://www.bostonherald.com | Business & Markets

BOSTON — A Massachusetts investment advisor has been charged in a scheme to defraud two clients out of more than $750,000.

Ryan Nestor of Marblehead was accused Monday of misappropriating the money by investing it in California-based AOB Commerce Inc., which purported to make loans to companies in Asia.

In 2007 the Securities and Exchange Commission accused AOB of using invested funds in a Ponzi scheme, to repay interest due to other investors. Prosecutors said Nestor expected to receive part of the returns. AOB has said it believed it was following the law.

Nestor’s attorney, Peter Krupp, said Nestor did not know the investment he made on behalf of his clients was not legitimate and “deeply regrets” their losses. Krupp said Nestor also lost some of his own money and is cooperating with the government.

Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1157415