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Investor Kenneth Starr ArrestedTim King Salem-News.com
(SALEM, Ore.) - Bloomberg reports that New York investment adviser Kenneth Ira Starr, who has a client list that has included actors Sylvester Stallone and Wesley Snipes, was charged with stealing money from his clients so he could buy luxury items including a $7 million apartment.
Wikipedia defines a Ponzi scheme as, "a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned."
Ponzi schemes often entice new investors by offering returns others investments can't guarantee. They come in the form of short-term returns that are either abnormally high or unusually consistent. "The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going." Wikipedia states.
The 65-year old Starr is also a nonpracticing lawyer.
Starr was taken into custody today by federal prosecutors in New York. The charges include fraud, money laundering and lying to a federal officer; part of a $30 million fraud according to the Bloomberg article.
Federal authorities also charged Andrew Stein, former borough president in Manhattan, of aiding Starr in the fraud.
Robert Beranger with the FBI said Starr, who managed more than $700 million, "systematically defrauded his clients," in a criminal complaint in Manhattan federal court.
Beranger also said, "He used his access to famous and powerful clients to burnish an image of trustworthiness, leading his clients to entrust him with management and control of their financial affairs." In documents filed with the court, he alleges that Starr sometimes assumed "total control" over his clients' "financial lives."
Bloomberg reports having contacted Jonathan Bristol, attorney for Starr, Starr Investment Advisors, and Starr & Co., but they did not receive a statement. Same story on another attorney for Starr, Andrew Maloney; no return contact.
It looks like Starr's downfall may be connected to his over lifestyle. He dropped about $7 million from client accounts into a Manhattan apartment in April. The place has five bedrooms, six and a half bathrooms. It has a granite lap pool measuring 32-feet, and according to the SEC, a 1,500-square-foot garden. Kind of unusual in these parts, you might say. The SEC considers its complaint to be an emergency action, brought on swiftly to halt an ongoing fraudulent scheme.
Starr's wife Diane Passage was also named; the complaint describes her as a producer of films and plays, and a philanthropist.
Do you remember when Wesley Snipes was taken down for filing false income tax returns? Starr was a witness in Snipes' 2008 trial, when the actor was convicted in federal court in Ocala, Florida. Snipes alleged that Starr's testimony in the case was false, according to a court filing that Bloomberg accessed. In 2002, Starr was sued by Silvester Stallone, who says Starr’s financial advice meant a $10 million loss on the stock of Planet Hollywood International Inc. Stallone says Starr's bias was related to the fact that he also advised Keith Barish, a big shareholder and board member of Planet Hollywood.
The SEC documents do not name any of Starr’s clients in court papers. They only state that on his client list are more than 30 “high net-worth individuals, many of whom are socialites or luminaries in the entertainment and business worlds,” she SEC said.
(Editor note: This story had a significant error earlier, it was our oversight and the error involved a misidentify of the individual named in the story.)
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