You Can't Cheat an Honest Man: How Ponzi Schemes and Pyramid Frauds Work... by James Walsh

Author:James Walsh
Language: eng
Format: mobi, epub
ISBN: 1563431696
Publisher: Silver Lake Publishing
Published: 2009-05-26T05:00:00+00:00

This aspect of the company’s marketing system was kept secret until after the company was forced into bankruptcy in September 1990. Colonial Realty salesmen maintained that the finders did not want it known that they were getting money in return for recommending their clients, relatives or friends make investments. (Many of the payments violated federal securities laws, which prohibit anyone other than registered brokers from being paid commissions.)

In September 1990, involuntary bankruptcy proceedings were filed against Colonial Realty in federal court. Six banks that had loaned money initiated the proceedings. Investors had a total of more than $350 million in limited partnerships at the time.

In October 1990, Googel, Sisti and Shuch were indicted on federal felony charges.

Shuch killed himself in February 1992 by putting a plastic garbage bag over his head. The suicide took place in his $10 million custombuilt home.

On May 5, 1993, Googel pled guilty to two counts of wire fraud, one count of bank fraud, and one count of attempting to impede the administration of the internal revenue laws. Two weeks later, Sisti pleaded guilty to two counts of bankruptcy fraud, one count of wire fraud, and one count of structuring transactions to evade reporting requirements.

Both men cooperated extensively with prosecutors and the civil attorneys. Under federal sentencing guidelines, Googel and Sisti faced sentences of between two and five years. They hoped their cooperation would convince the sentencing judge to impose even less time.

It didn’t. The judge not only concluded that they deserved no leniency but found that the guidelines did not adequately reflect the severity of their crimes. He chastised Googel for recruiting millions in investments even after bankruptcy experts had advised that Colonial Realty was failing. And he concluded that Googel had obstructed justice by attempting to arrange a meeting with a witness being interviewed by federal authorities.

Worse still, as Colonial Realty was collapsing, Googel had transferred millions to relatives. Much of that had been recovered as part of a deal with the bankruptcy trustee; but Googel’s family was allowed to keep about $1.25 million in cash and other assets—including a halfmillion dollar house.

The judge sentenced Googel to nine years in a federal prison camp.

The judge sentenced Googel to nine years in a federal prison camp. square-foot mansion with a movie theater and shooting range and ordered custom-made multimillion-dollar yachts. At his sentencing hearing, though, Sisti seemed delicate and humble. He spoke in a calm, unimposing voice, telling the judge he was sorry for his crimes and sorry he could not make things right. “I can’t change what I did,” Sisti said, “but I can change the person who did them. I just hope I live long enough to make it all up to [my family].”

The judge gave him an eight year sentence to work on the change.

The criminal sentences moved the focus to various civil lawsuits. In April 1994, a panel of mediators approved a settlement worth about $100 million. The deal resolved some 3,000 lawsuits, representing most of the civil actions spawned by

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