Investment advisor pleads guilty to $2.4 million fraud targeting union pension fund and other investors in new jersey and new york
FOR IMMEDIATE RELEASE
March 31, 2011
NEWARK, N.J. – A Westfield, New Jersey-based investment advisor admitted today to defrauding numerous investors, including a union pension fund, of more than $2.4 million by funding his lavish lifestyle with money he claimed to be investing in conservative securities, U.S. Attorney Paul J. Fishman announced.
Carlo Chiaese, 38, of Springfield, N.J., pleaded guilty before U.S. District Judge William J. Martini in Newark federal court to an Information charging him with securities fraud.
According to documents filed in this case and statements made during Chiaese’s guilty plea proceeding:
Chiaese, who had been working in the financial industry since 1999, solicited a number of new clients through his independent investment firm, CGC Advisors LLC, as early as 2008. He drew clients by touting his investment experience and promising to invest their funds in conservative but traditional securities like bonds and mutual funds. Chiaese admitted that between November 2008 and September 2010, he raised more than $2.9 million from individuals and entities in New Jersey, New York and abroad based on his representations. One investment of approximately $1.71 million came from a pension fund containing the pensions of over 850 current and former members of Local 333, United Marine Division, International Longshoreman’s Association, a union made up of members who were employed in the tugboat and ferry business in the New York and New Jersey waterways.
Chiaese admitted that he did not invest any of the victim investors’ money as he promised. Instead, he used over $1.4 million in investor money to pay for leases on a Porsche 911 Carrera, Audi Q7 and a Land Rover; his fees at two country clubs; stays at luxury hotels in New York, Florida and St. Thomas; and purchases at high-end retailers like Hermes, Salvatore Ferragamo, Bergdorf Goodman, and Saks Fifth Avenue. Chiaese also made cash withdrawals in excess of $185,000 and transferred over $800,000 to his wife and members of her family.
Chiaese also used at least $280,000 of the investors’ money to repay other investors, including one in London, in Ponzi-scheme fashion.
To conceal his fraudulent conduct, Chiaese sent many of the investors fake trade confirmations and account statements that made it appear that he had invested their money in securities when he had not.
The securities fraud count to which Chiaese pleaded guilty carries a maximum potential penalty of 20 years in prison and a fine of up to $5 million. Sentencing is scheduled for July 14, 2011.
U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special
Agent in Charge Michael B. Ward, for the investigation leading to today’s guilty plea. He
also credited the U.S. Securities and Exchange Commission’s New York Regional Office, under
the direction of Regional Director George S. Canellos, and thanked the United States Postal Inspection Service, under the direction of Acting Postal Inspector in Charge Thomas E. Boyle.
The government is represented by Assistant U.S. Attorneys Matthew E. Beck and Aaron Mendelsohn of the U.S. Attorney’s Office Economic Crimes Unit in Newark.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force 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.
Defense counsel: Jack Arseneault, Esq.; David W. Fassett, Esq., Chatham, N.J.