PA investment manager charged in multi-million dollar Ponzi schemeApril 5th, 2010 - 5:41 pm ICT by admin
By Michael van Poppel
PHILADELPHIA, PENNSYLVANIA (THAINDIAN NEWS) — A PA investment manager was charged with running a multi-million dollar Ponzi scheme, prosecutors with the U.S. Attorney’s Office said.
Donald Anthony Young, 38, was named in an indictment which charges him with one count of mail fraud and one count of money laundering. According to prosecutors, Young executed a Ponzi scheme which caused more than $26 million in losses to investors.
Young operated an investment advisory business since November 1999 in Kennett Square, which is a borough in Chester County, Pennsylvania. His business was known by a number of names, including Acorn Capital Management II LP, Acorn Capital Management LLC, and Acorn II LP. One of these was registered with the United States Securities and Exchange Commission (”SEC”) as an investment adviser, making it subject to SEC regulations.
According to the indictment, Young approached individuals to entrust him with managing their investments. When they did, Young allegedly deposited those funds into an investment account at Wachovia Bank. Prosecutors believe he managed to obtain approximately $96 million from investors.
The indictment further alleges that Young falsely promised to invest his clients’ money in well-established and large companies to earn profits. But instead, it says, Young diverted more than $25 million dollars of his clients’ money for his own use.
Each month, prosecutors allege, Young and his investment fund accountants received statements which listed the deposits to and disbursements from the investment account which was maintained by the defendant. While Young’s clients did not receive copies of these statements, Young concealed the theft of funds by lying to his accountants about the source of the deposits and by lying to his accounts about the true recipient of the disbursements.
Young also prepared false quarterly statements for his clients, which were never shown to his accountants. Those statements showed inflated fund balances but did not show that he had transferred funds to his own accounts.
The indictment also alleges that Young altered yearly Internal Revenue Service (IRS) Forms K-1, which is issued by a partnership or S-Corporation to report a partner or shareholder’s distributed share of income. Young is accused of altering the forms consistent with the profits he told investors they earned, but which concealed that he had diverted their funds for his own use. Young mailed or faxed the false quarterly schedules and K-1 forms to his investors.
With the stolen money, prosecutors say, Young maintained and purchased a luxury home with a staff and a personal chef and a horse farm in Coatesville, Pennsylvania. He also bought other homes in Palm Beach, Florida, and Northeast Harbor, Maine.
Besides the homes, he also spend stolen money on country, golf, and tennis clubs, horses and horse equipment, livestock, farm equipment, trailers, part ownership in a jet, cars, boats, antiques, fine art, jewelry, exercise equipment, a sauna, personal expenses, and other personal business interests which were unrelated to his investment fun.
But later, after he had spent so much for his own benefit, his investment fund’s balance had dropped precipitously and Young allegedly created false statements to submit to a broker-dealer servicing his investment account. These statements falsely showed that Young had approximately $23 million in additional funds in two other accounts.
“Ponzi schemes are usually a vehicle for an unscrupulous person to live high off of someone else’s wealth,” said U.S. Attorney Michael Levy. “According to the indictment, this defendant helped himself to others’ fortunes, living a life of luxury, with little or no regard for the damage to our financial markets, our economy, and the reputation of the investment advisors who follow the rules.”
Because Young was allegedly stealing millions of dollars from his investors and using that money to pay his own personal and business expenses, he was unable to pay investors when they requested redemptions and he was forced to liquidate other investors’ funds to pay these redemptions. The indictment further alleges that when the United States Securities and Exchange Commission opened an investigation into Young’s business, Young attempted to obstruct the investigation by providing false and misleading information to the SEC and by refusing to provide the SEC documents, to which it was legally entitled.
“The FBI views these types of financial investment Ponzi fraud schemes as significant criminal problems, because of the devastating effect they have not only on the individual victims who are preyed upon but also the effect they have on financial markets and on the overall economy,” said Special Agent-in-Charge Janice K. Fedarcyk, of the Philadelphia Division of the FBI.
If Young is found guilty and convicted, he faces a maximum possible sentence of 30 years incarceration, five years supervised release, a $500,000 fine, a $200 special assessment, and approximately $27 million restitution.
The case was investigated by the United States Securities and Exchange Commission, the Federal Bureau of Investigation, and the United States Postal Inspection Service, and is being prosecuted by Assistant United States Attorney Paul L. Gray.
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