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Madison Investment Advisor Admits To Fraud, U.S. Attorney Says

Thomas F. Donnelly of Shoreline Index Partners LP waives right to indictment and pleads guilt on one count of mail fraud stemming from his scheme to defraud four investors of approximately $675,000

In a continuing effort to target financial fraud in Connecticut, U.S. Attorney David B. Fein today announced the results of six Connecticut Securities, Commodities and Investor Fraud Task Force investigations of individuals who have, or are alleged to have, stolen funds from investors.  The prosecutions include:

  • Thomas F. Donnelly, Jr., 57, an investment manager from Madison, who has admitted that he defrauded four investors of approximately $675,000;
  • A Washington Depot woman who is alleged to have represented herself as a successful investment advisor to defraud five individuals, including vulnerable victims, of at least $800,000;
  • An Avon resident who is alleged to have befriended and then defrauded at least three elderly women of approximately $1.2 million;
  • A Shelton man who is alleged to have operated various schemes to defraud investors of more than $290,000;
  • An investment advisor from Bolton who has admitted that he stole more than $200,000 in investor funds;
  • An unregistered and unlicensed “investment adviser” from Orange who is alleged to have defrauded numerous investors of hundreds of thousands of dollars.

US v. Donnelly

On December 13, 2011, Thomas F. Donnelly, Jr., 57, of Madison, waived his right to indictment and pleaded guilty before U.S. Magistrate Judge Donna F. Martinez in Hartford to one count of mail fraud stemming from his scheme to defraud four investors of approximately $675,000. 

The U.S. Attorney said court documents and statements made in court provide the following account:

Donnelly, an investment manager, engaged in a scheme to defraud investors of an entity he created and managed known as Shoreline Index Partners LP (“Shoreline”).

In an effort to solicit investors to provide funds to Shoreline, Donnelly made misrepresentations in an investment prospectus falsely indicating that he had received a significant return prior to June 2006 when he knew that no such returns had been generated.  Between June 2006 and July 2008, Donnelly obtained approximately $675,000 from four investors.

While he represented to these four investors that their funds would be invested, Donnelly forwarded only approximately $175,000 of these funds to a Chicago-based brokerage clearing house.  In an effort to convince these investors that their investments had generated a significant return, Donnelly altered the actual monthly brokerage statements by creating fraudulent monthly statements that purported to be from the Chicago-based clearing house.

In one statement that he mailed to Shoreline investors in approximately October 2008, Donnelly fraudulently indicated that Shoreline’s investments at the brokerage clearing house had a total value of more than $3.8 million when he knew that there was less than $50,000 in Shoreline funds at the brokerage clearing house.  In pleading guilty, Donnelly also has admitted that he altered documents prepared by an accounting firm, forged the signature of a certified public accountant, and then submitted these altered and forged accounting documents to Shoreline’s investors.

Donnelly is scheduled to be sentenced on March 5, 2012, at which time he faces a maximum term of imprisonment of 20 years, a fine of up to $1.35 million and an order of restitution.  This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Senior Litigation Counsel Richard J. Schechter.

“One year ago, we announced the formation of the Connecticut Securities, Commodities and Investor Fraud Task Force, an unprecedented partnership in the State to investigate and prosecute financial crimes,” said U.S. Attorney Fein, said in a prepared statement.  “At that time, we also announced the local results of a Department of Justice nationwide operation that targeted a broad array of investment fraud schemes that directly prey upon the investing public.  The prosecutions we are announcing today show the Task Force’s ongoing efforts to uncover fraud in the marketplace and root out fraudsters who steal individuals hard-earned funds.”

“These recent prosecutions demonstrate that the investing public must be vigilant before entrusting their funds to any individual or firm,” U.S. Attorney Fein continued.  “People should  research their investment advisors and verify information provided to them.  Everyone should be suspicious of guaranteed high rates of return, investments that promise ‘little or no risk of loss,’ and investment scenarios that are difficult to understand.”

U.S. Attorney Fein further noted that individuals need to be wary of high-pressure tactics from individuals who solicit investment funds, regardless of whether the individuals are complete strangers or friends. 

“We have found that, in many instances, the individuals who have orchestrated these schemes have victimized friends, associates or fellow members of their religious or other community organizations,” stated U.S. Attorney Fein.

“You should be rigorous in your due diligence when considering whether and where to place your investment and retirement funds and be alert to these schemes.  And to anyone who is operating a scheme to cheat investors – particularly vulnerable investors – of their savings, the U.S. Attorney’s Office and our Task Force partners are committed to bringing you to justice.”

“Investor confidence is integral to this nation’s economic recovery and relies upon the integrity of the financial institutions entrusted with investors’ hard-earned funds,” said Kimberly K. Mertz, Special Agent in Charge of the Federal Bureau of Investigation in New Haven, in a prepared statement.  “The Connecticut Securities, Commodities and Investor Fraud Task Force represents a unique partnership between Connecticut’s federal, state and local law enforcement, and state and national regulatory agencies, that has been formed to ensure that those working in the financial services arena do not violate investors’ trust through criminal practices.  The FBI, along with its partners, is dedicated to proactively investigating the perpetrators of these crimes to ensure they are brought to justice.”    

The FBI encouraged citizens to report any financial fraud schemes by calling, toll free, 855-236-9740, or by sending an email to ctsecuritiesfraud@ic.fbi.gov.

The Connecticut Securities, Commodities and Investor Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Justice’s Criminal Division, Fraud Section and Antitrust Division; U.S. Securities and Exchange Commission (SEC); U.S. Commodity Futures Trading Commission (CFTC); Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Office of the Chief State’s Attorney; State of Connecticut Department of Banking; Greenwich Police Department and Stamford Police Department.

The Task Force is actively investigating matters relating to insider trading, market manipulation, Ponzi schemes, investor fraud, financial statement fraud, violations of the Foreign Corrupt Practices Act, and embezzlement.  Each Task Force participant brings an expertise to the Task Force, and members will conduct parallel investigations and share information as necessary so that all Task Force members may benefit from the different tools and resources each agency can provide.         U.S. Attorney Fein specifically acknowledged the investigative efforts of the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, the U.S. Postal Inspection Service, the Securities and Exchange Commission, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the State of Connecticut Department of Banking for investigating the fraud schemes targeted during this most recent enforcement effort.

“Illegal activity involving the investment industry has brought financial ruin to many Americans,” said William P. Offord, Special Agent in Charge, IRS Criminal Investigation, in a prepared statement. “IRS Criminal Investigation is proud to utilize our forensic accounting skills to put a stop to this type of white collar fraud.”

“The U.S. Postal Inspection Service has a long-standing commitment protecting consumers from fraud,” said Robert Bethel, Inspector in Charge of the U.S. Postal Inspection Service in New England, in a prepared statement.  “The Postal Inspection Service is proud to be a member of the Connecticut Securities, Commodities and Investor Fraud Task Force.  Through this partnership, we are able to bring those responsible for financial related crimes perpetrated through the use of the U.S. Mail to justice.”

“SIGTARP, the law enforcement agency that protects taxpayers who became investors in financial institutions under the federal Troubled Asset Relief Program, is a proud member of the Connecticut Securities, Commodities and Investor Fraud Task Force,” said Christy Romero, Deputy Special Inspector General for SIGTARP, in a prepared statement.

“Our progress on these cases where TARP has been exploited is the product of extraordinary teamwork among these task force agencies and law enforcement partners.  We have high expectations for the work that lies ahead, and we will continue to work as a formidable team to bring to justice those who seek to profit criminally from our country's economic crisis.”

“As a member of the Connecticut Securities, Commodities and Investors Task Force the Department of Banking is committed to sharing its resources and expertise in our collective efforts to protect the investing public,” said Commissioner Howard F. Pitkin of the Connecticut Department of Banking, in a prepared statement.

“We commend the U.S. Attorney for establishing this task force to help us all achieve this important goal.”

The Connecticut Securities, Commodities and Investors Task Force operates in conjunction with the President’s Financial Fraud Enforcement Task Force, which also includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The Task Force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information on the task force, please visit www.StopFraud.gov.

Other Investment Fraud Prosecutions

As to the defendants who are awaiting trial, U.S. Attorney Fein stressed that the charges are not evidence of guilt.  The charges are only allegations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.

US v. Brass

On November 22, 2011, a federal grand jury sitting in New Haven returned an indictment charging ROBIN BRUHJELL BRASS, 55, of Washington Depot, with four counts of mail fraud stemming from an alleged investment fraud scheme.  The indictment alleges that, from approximately March 2009 to approximately November 2011, Brass, acting as a principal of The BBR Group, Nibor Investment Fund, LLC, and Creative Financial Services, Inc., and representing herself as a successful investment advisor, solicited funds from investors.  Brass would tell potential investors that their money would be safe if invested with her because she had a formula for investing that ensured against loss and guaranteed a good return on investment.  However, Brass failed to invest all of the funds entrusted with her and used some of the money to pay personal expenses for herself and her family, such as mortgage and credit card bills, college tuition bills, home furnishings, clothing, and to make “lulling” payments to previous investors.  The indictment further alleges that Brass sent fraudulent account statements to certain investors that made it appear as if their investments were performing well.

It is alleged that, through this scheme, Brass defrauded at least five individuals of at least $800,000.

Brass has been detained since her arrest on November 15, 2011.  Since the date of Brass’s arrest, Task Force investigators have continued to identify and locate additional victims of this alleged scheme.

This matter is being investigated by the U.S. Postal Inspection Service, the Special Inspector General for the Troubled Asset Relief Program, and the Federal Bureau of Investigation, with assistance from the State of Connecticut Department of Banking.  The case is being prosecuted by Assistant U.S. Attorney Susan L. Wines.

US v. Ilovici

On December 7, 2011, a federal grand jury sitting in Hartford returned a 11-count indictment charging FLORIN ILOVICI of Avon with wire fraud, mail fraud and money laundering offenses stemming from an alleged scheme that targeted and defrauded elderly women living in the Greater Hartford area.  The indictment alleges that, beginning in 2008, ILOVICI cultivated personal relationships with at least three elderly women in order to persuade them to liquidate relatively safe assets, purportedly, to invest money with him.  ILOVICI, who at various times was employed as an insurance agent and an investment advisor, initially obtained money from the victim-investors by falsely claiming that he could invest their money in investment products that would earn a greater rate of return than their existing investments.  Following these initial investments, ILOVICI obtained additional monies from victim-investors by falsely stating that their previous investments were performing well when, in fact, they had lost substantial value.  It is alleged that ILOVICI created sham loan documents to make it appear that the victim-investors had loaned or gifted him their money.  It is alleged that ILOVICI defrauded the victim-investors out of approximately $1.2 million.  ILOVICI failed to invest the money as represented and instead diverted investors’ funds for his own personal use and benefit, by depositing the funds into his personal checking accounts, spending the money on ordinary personal expenses, transferring the money to his personal brokerage accounts in order to purchase high-risk securities for himself, and making semi-regular “lulling” payments to certain victim-investors using funds received from other victim-investors.

ILOVICI has not been apprehended and is considered a fugitive from justice.  Citizens with information about his whereabouts are asked to contact the Federal Bureau of Investigation at 203-503-5000.         This case is being investigated by the United States Postal Inspection Service, the Internal Revenue Service – Criminal Investigation, the Federal Bureau of Investigation, with the assistance of the U.S. Securities and Exchange Commission and the Connecticut Department of Banking.  The case is being prosecuted by Assistant United States Attorney Christopher M. Mattei.

US v. Goldsmith

On December 14, 2011, a federal grand jury in New Haven returned an indictment charging JOHN H. GOLDSMITH, 57, of Shelton, with two counts of securities fraud and four counts of wire fraud stemming from an alleged scheme to defraud several investors.  It is alleged that, between approximately 2005 and 2010, Goldsmith devised and executed a scheme through which he solicited investments from victims in various nonexistent companies.  In one instance, Goldsmith claimed that some of the investments were to be used to purchase stock in a publicly traded company at discounted rates.  In another scheme, Goldsmith claimed that invested funds were to be used to set up a video-sharing website.  During these schemes, Goldsmith concealed his activities by fabricating checks and bank records, and using one investor’s funds to repay another investor.  It is alleged that GOLDSMITH defrauded three Connecticut residents of more than $290,000 by converting a significant portion of invested funds to his own personal use.

This matter is being investigated by the Federal Bureau of Investigation is being prosecuted by Special Assistant United States Attorney Liam Brennan.

US v. Brady

On December 15, 2011, MICHAEL BRADY, 37, of Bolton, waived his right to indictment and pleaded guilty before U.S. Magistrate Judge Joan G. Margolis in New Haven to count of mail fraud stemming from an investment fraud scheme.  From approximately 2008 to 2010, Brady worked as an investment advisor for a financial services firm and solicited client funds for investment.  However, instead of investing the money, Brady converted it to his own personal use.  In an effort to cover up this scheme, Brady would, at times, prepare fraudulent account statements and mail these statements to victims in order to make it appear that the money was actually invested legitimately.  Through this scheme, Brady took approximately $194,000 from four victims.  Upon discovering the fraud, Brady’s employer terminated him and has since reimbursed his victims.

In a separate fraud scheme, between approximately January and August 2011, Brady stole approximately $30,000 from another victim, an optometry firm.  Brady was entrusted to handle the firm’s 401-k contributions but, instead of investing the money, he converted it to his own personal use.

Brady is scheduled to be sentenced on March 5, 2012, at which time he faces a maximum term of imprisonment of 20 years and a fine of up to approximately $400,000 and an order of restitution.

This matter is being investigated by the Federal Bureau of Investigation and the U.S. Postal Inspection Service, with the assistance of the State of Connecticut Department of Banking.  The case is being prosecuted by Assistant United States Attorney Susan L. Wines.

US v. Viola  

On August 11, 2011, GREGORY VIOLA, 59, of Orange, was arrested on a criminal complaint charging him with mail fraud.  The charge stems from an alleged scheme to defraud investors of at least hundreds of thousands of dollars via a Ponzi scheme.

According to court documents and statements made in court, Viola operated an investment business in Orange.  It is alleged that since as early as 2007, Viola engaged in a scheme to defraud multiple investors by promising his investors that their funds would be invested, and that they would receive a specified rate of return on the investments as well as the potential for the investment to appreciate.  Rather than invest funds provided by investors, it is alleged that Viola engaged in a Ponzi scheme in which he used new investor funds to make payments to earlier investors.  It is also alleged that Viola mailed investors fraudulent statements that falsely represented the amount of funds that the investors had on account.

The criminal complaint specifically alleges that VIOLA provided one investor with a purported E-Trade account statement representing that the investor had in excess of $300,000 on account with VIOLA.  Subsequent investigation by law enforcement has revealed that this statement is false, and E-Trade has no record of an account in the investor’s name.

Since the date of his arrest, the Federal Bureau of Investigation has continued to identify and locate additional victims of this alleged scheme. This matter is being investigated by the Federal Bureau of Investigation, with the assistance of the Stamford Police Department and the State of Connecticut Department of banking.  The case is being prosecuted by Senior Litigation Counsel Richard J. Schechter.

Simon February 01, 2013 at 06:54 AM
This is exactly why we need to always be on our guards when it comes to investments of our well-earned money. Sometimes we are enticed by the words of the financial advisor that we do not notice the flaws of the plans or policies introduced by them. It is also advisable to take up investment plans from credible financial institutions only or government bodies which are even better and stay safe of frauds.
Simon February 01, 2013 at 07:09 AM
That is not a small sum of money to begin with and I am sure it must have involved many upset people. This is the exact reason why we should always be on our guards before we agree on an investment plan and only invest from credible financial institutions. Never be quick to accept people's offers, especially when the deals are too good to be true.

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