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Manhattan U.S. Attorney Charges Managing Director Of Investment Advisory Firm For NBA Players Union With Attempting To Defraud Union Of $3 Million

FOR IMMEDIATE RELEASE
Thursday, April 25, 2013

Defendant and Another Principal Also Charged With Obstruction of Justice

Preet Bharara, the United States Attorney for the Southern District of New York, Andriana Vamvakas, the New York District Director for the U.S. Department of Labor’s Office of Labor-Management Standards (“DOL-OLMS”), and Robert Panella, the Special Agent-in-Charge of the New York Field Office of the U.S. Department of Labor's Office of Inspector General, Office of Labor Racketeering and Fraud Investigations (“DOL-OIG”) announced today the unsealing of a three-count criminal Complaint charging JOSEPH LOMBARDO, the founder and managing director of Prim Capital Corporation (“Prim”), with attempting to defraud the National Basketball Players Association (“NBPA”) of $3 million through the use of a fraudulent retention contract. The Complaint also charges LOMBARDO and CAROLYN KAUFMAN, a principal at Prim, with obstructing a grand jury investigation in the Southern District of New York. LOMBARDO and KAUFMAN were arrested this morning at their residences in Ohio, and were presented in federal court in the Northern District of Ohio, Cleveland branch, before U.S. Magistrate Judge Greg White. LOMBARDO and KAUFMAN will make their first appearance in Manhattan federal court on May 2, 2013.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Joseph Lombardo faked the signature of a dead man as part of manufacturing a multi-million dollar contract out of whole cloth that, had it been enforced, would have caused significant losses for basketball players who entrusted him with their savings. And together with his partner in crime, Carolyn Kaufman, he allegedly lied about it to a federal grand jury. Now they will both have to answer to the justice system they allegedly tried to obstruct.”

DOL-OLMS New York District Director Andriana Vamvakas said: “The scheme allegedly attempted by the subjects of this investigation would have caused the union to lose funds that rightfully belonged to the membership of the NBPA. We will continue to investigate crimes against unions to protect the members’ assets.”

DOL-OIG Special Agent-in-Charge Robert Panella said: “By allegedly falsifying a contract with the NBPA, the defendant attempted to defraud the organization of $3 million in union assets. We will continue to work with our law enforcement partners to protect union assets and root out corruption involving the NBPA and other labor organizations.”

According to the allegations in the Complaint unsealed today in Manhattan federal court:

From 2001 until 2013, Prim was the primary outside investment advisory firm entrusted with the NBPA’s investments and finances. In that capacity, Prim performed various services for the NBPA, including assisting with the management of up to $250 million of the NBPA’s assets, reviewing the investments of individual NBA players, and conducting financial seminars for NBA players. Prim was founded and led by LOMBARDO. KAUFMAN served as President of Prim’s advisory services component.

In May of 2012, as part of a DOL investigation, Prim was served with a subpoena requesting copies of all agreements between Prim and the NBPA. In response, Prim produced a copy of a 2005 contract between the NBPA and Prim, under which Prim’s fee was $350,000 per year. The 2005 contract was signed by the Executive Director of the NBPA, the Treasurer of the NBPA, and LOMBARDO, and was renewable annually upon agreement of the parties. That was the only contract that Prim produced.

Several months later, in January of 2013, after Prim learned that a law firm’s review of the NBPA was going to be made public in the near future, Prim produced a previously undisclosed contract with the NBPA (the “Purported 2011 Contract”). Prim’s fee under this contract was $602,000 per year for a five-year term, for a total of $3,010,000. The Purported 2011 Contract also contained a provision indicating that it could not be cancelled for any reason by the NBPA. The Purported 2011 Contract was supposedly signed in March 2011 by LOMBARDO, Gary Hall, the former NBPA General Counsel, and one other NBPA employee.

An investigation revealed that the signature of Hall was not authentic, and that the Purported 2011 Contract was actually created at Prim months after the March 2011 death of Gary Hall. The investigation also revealed that LOMBARDO arranged for the creation of a signature stamp capable of stamping the signature “Gary A. Hall,” and used the stamp to falsify Hall’s signature months after his death. The investigation further revealed that the signature of the other NBPA employee was forged as well.

In addition, the investigation revealed that LOMBARDO and KAUFMAN had attempted to obstruct a grand jury investigation. During the course of the investigation, both LOMBARDO and KAUFMAN appeared before the grand jury and provided false testimony. KAUFMAN testified that she had not spoken with anyone regarding her testimony. However, in a recorded conversation prior to appearing before the grand jury, LOMBARDO gave her specific instructions on how to answer questions before the grand jury, and said that his “life is in [her] hands.” In another recorded conversation, LOMBARDO instructed another individual that if he provided certain false information to the grand jury about the creation of the contract “[w]e’re home free.” In a third recorded conversation, LOMBARDO instructed another individual to provide false information to the grand jury and said, “It’s important that we didn't doctor this document up, okay?”

*                      *                      *

LOMBARDO, 72, of Gates Mills, Ohio, is charged with one count of attempted wire fraud, one count of attempted mail fraud, and one count of obstruction of justice. KAUFMAN, 72, of Hudson, Ohio, is charged with one count of obstruction of justice. LOMBARDO faces a maximum sentence of 20 years in prison on each count of wire and mail fraud, as well as a maximum fine of $250,000, or twice the gross gain or gross loss from the offense. Both LOMBARDO and KAUFMAN face a maximum sentence of 20 years in prison on the count charging obstruction of justice, as well as a maximum fine of $250,000.

Mr. Bharara praised the outstanding investigative work of DOL and DOL-OIG. Mr. Bharara added that the investigation is continuing.

This case is being handled by the Public Corruption Unit of the U.S. Attorney’s Office. Assistant United States Attorneys Randall W. Jackson and Daniel C. Richenthal are in charge of the prosecution.

The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

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US v Joseph Lombardo and Carolyn Kaufman Complaint(PDF)

 

 

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