Ponzi schemes still prey on Florida Victims

Robert Trigaux, Tampa Bay Times

Did Floridians learn nothing from Bernie Madoff, the modern master of Ponzi schemes? Did we already forget Orlando boy band producer Lou Pearlman, credited with running one of the longest Ponzi schemes in U.S. history? Did we nap while Sarasota Ponzi schemer Arthur Nadel bilked locals of $162 million?

It seems so, judging from the torrent of financial ripoffs that continue to snare unwary investors across this state. Too many scams bear the distinct signs of fraud first masterminded by Charles Ponzi back in the 1920s. Literally dozens of Ponzi schemes involving scamsters or their victims are proliferating in Florida. Some are in the process of being uncovered by law enforcement, detailed in private lawsuits or being punished by court rulings and jail time. But there are far too many of them.

Why? Because too many folks remain willing to hand over their money based on flimsy or outlandish promises of high returns with little or no risk. Because Ponzi schemes apparently still work too well, often attracting investors greedy for profits in a world of low interest rates and volatile stock markets. Just so we're all on the same page, a Ponzi scheme occurs when an individual or group pays returns to current investors from funds freshly supplied by new investors rather than from profits earned on the promised investment. New investors are lured with promises of big returns. The scheme typically collapses of its own weight when there is no longer enough new money to meet the demands of existing investors.

Madoff and Pearlman are in jail, and Nadel is dead. But the crop of Florida-related Ponzi schemes appears alive and well based on headlines in the past two months.

• Jennifer Hoffman and two conspirators with Assured Capital Consultants in the Orlando suburb of Clermont lured more than 100 people to invest more than $10 million in an account but diverted funds from new investors to pay old ones. She and her accomplices used part of the money to buy things for themselves, including homes, federal prosecutors said. Hoffman was sentenced to nine years in federal prison.

• Michael Szafranski was sentenced to 21/2 years in prison and repaid victims $6.5 million for his deceptive role in luring investors to disbarred South Florida lawyer Scott Rothstein's $1.2 billion Ponzi scheme. Prosecutors say Szafranski offered investors returns for putting their money into phony lawsuit settlements. He is the latest of more than two dozen people convicted with ties to the Ponzi scheme. In court, he said "greed" drove him to become a "despicable person."

• Three men, including two living in Florida, were ordered by a judge in Newark, N.J., to pay $14 million in fines and restitution for bilking 70 investors. The court found the three men targeted the elderly and sold securities from a New Jersey company that promised a 12 percent return based on investments in life insurance policies and trusts. Instead, the court said, money from new investors paid off existing investors.

• At the end of a six-week federal trial in Palm Beach, con man Joe Zada was convicted on 15 counts of running a $50 million Ponzi scheme that promised investors profits topping 20 percent. Federal prosecutors say Zada bragged of his supposed wealth and connections to Saudi Arabian royalty (even hiring actors to portray a Saudi prince and princess at a party) while scamming investors that included former National Hockey League star Sergei Fedorov and a group of Florida firefighters.

Should I go on? This past summer, former Miami Dolphins cornerback Will Allen was charged in nearly two dozen felony counts that he and a business partner ran a Ponzi scheme promising big returns to those who invested in high-interest bridge loans to offseason pro athletes. More than $30 million was raised. Federal authorities say investors were misled and part of the money raised went to cover personal expenses at casinos and nightclubs. Also this summer, Orlando area financial adviser Chris Maguire, who drove a Lamborghini and bought houses and cars for his friends, faced multiple lawsuits for an alleged fraud. Ron Ellis, pastor of the black church Exalted Word Ministries near Tampa, sued Maguire for $2 million in losses. Ma­guire's whereabouts were unknown and a federal judge has ordered his arrest. A complaint filed in Tampa by the U.S. Attorney's Office said Maguire, then 33, told investors he ran Vivid Funding LLC, which provided "proof of funds" letters for corporations. But new investor funds were used to pay existing investors while Maguire siphoned $4 million for personal use.

All this, and much more, in just the past several months. And these scams are simply examples of those that have come to light. Want to be a victim of a promised high-return deal? Feel free. Otherwise, do your homework before investing. Stop empowering all the Madoff groupies in Florida.

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