Spiro Baltatzidis, Former Founder And Chief Executive Officer Of Starwich, Inc., Sentenced In Manhattan Federal Court To Six Months In Prison For Wire Fraud
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SPIRO BALTATZIDIS, the former Founder and Chief Executive Officer of Starwich, Inc. (“Starwich”), was sentenced today to six months in prison for wire fraud. BALTATZIDIS pled guilty in January 2013 before United States District Judge Ronnie Abrams, who also imposed today’s sentence.
According to the Information and statements made at the plea proceeding:
Starwich was a privately held corporation headquartered in New York that engaged in the food services business, and more specifically, the upscale specialty sandwich business. Starwich operated a micro-chain of restaurants located around Manhattan and maintained multiple corporate bank accounts (collectively, the “Starwich Bank Accounts”) at Citibank, N.A. (“Citibank”) into which investor funds were deposited.
From the summer of 2007 through May 2008, BALTATZIDIS solicited a $25 million investment from a financial institution (the “Victim Financial Institution”). BALTATZIDIS represented that the purpose of the investment was to expand the business operations of Starwich. In connection with the investment solicitation, the Victim Financial Institution conducted due diligence to determine whether Starwich was a prudent investment opportunity. This due diligence included, among other things, a review of Starwich’s financials. Accordingly, at the Victim Financial Institution’s request, on September 16, 2007, it received a fax from Starwich containing Citibank statements for one of the Starwich Bank Accounts. The first statement purported to cover the period December 1, 2006 through December 31, 2006, and reflected an ending balance of approximately $450,000. Another statement for the same account purported to cover the period June 1, 2007 through June 30, 2007, reflected an ending balance of approximately $1.2 million – an increase in the ending balance of well over 100% in the six-month period between December 2006 and June 2007.
Based in part on the June 2007 statement, the Victim Financial Institution entered into a Memorandum of Terms (“the Memorandum”) with Starwich in November 2007. The Memorandum detailed the principal terms of a proposed $25 million investment in shares of Starwich to be divided into three stages of disbursements. However, the bank statements provided to the Victim Financial Institution were fraudulent. The actual bank account records from Citibank showed a balance of approximately $400 as of December 31, 2006, and approximately $200 as of June 30, 2007.
In furtherance of its due diligence, the Victim Financial Institution requested a further update of Starwich’s financials and in response to this request, BALTATZIDIS forwarded an email chain between BALTATZIDIS and an employee of Citibank (the “Bank Employee”) on November 15, 2007. The content of the email chain forwarded to the Victim Financial Institution (the “Victim Financial Institution Email”) reflected that BALTATZIDIS asked the Bank Employee for the balance of one of the Starwich accounts for the period ending September 30, 2007, and the Bank Employee purportedly responded that the account’s current balance was approximately $1.3 million.
In fact, the email chain forwarded by BALTATZIDIS to the Victim Financial Institution on November 15, 2007, was materially altered from its original version (the “Authentic Citibank Email”). Specifically, in the Authentic Citibank Email, the Bank Employee wrote that the account’s current balance was “-$3,963.93,” whereas the Victim Financial Institution Email reflected a balance of “$1,317,963.93.” In addition, the Authentic Citibank Email included a copy of the account statement for the period ending September 30, 2007, whereas the Victim Financial Institution Email omitted the account statement.
From November 15, 2007 through May 2008, BALTATZIDIS and the Victim Financial Institution continued their discussions regarding the solicited financial investment in Starwich. By May 2008, however, the Victim Financial Institution decided against investing with Starwich and ended its discussions with BALTATZIDIS. In August 2008, Starwich filed for bankruptcy.
In addition to his prison term, BALTATZIDIS, 38, was also sentenced to 30 months of supervised release, six months of which are to be served on home confinement.
Mr. Bharara praised the investigative work of the United States Postal Inspection Service.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Julian J. Moore is in charge of the prosecution.