03/29/2010

News / Ohio Investment Manager Charged in $29.7 Million Fraud

CLEVELAND, OH—Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, announced today that an information was filed against Enrique F. Villalba, age 47. Villalba is charged with one count of wire fraud for executing a scheme that defrauded 26 investors of $29.7 million. The defendant, a resident of Cuyahoga Falls, Ohio, operated numerous businesses, including Money Market Alternative, LP, his investment business, and Rico Latte coffee shops.

The information alleges that Villalba, a graduate of the U.S. Military Academy at West Point and of the University of Puget Sound School of Law, held himself out as an “investment manager” who, by employing his “Money Market Plus” investment methodology to the futures market, could realize long-term gains of eight to 12 percent for investors. The information alleges further that Villalba represented that his knowledge of physics, when combined with his application of a unique “momentum filter,” allowed him to predict with “an uncanny degree of certainty” how the futures market would trend at various times during a given month, thereby allowing him to purchase and sell futures contracts to maximize gains.

In order to reduce the risk inherent in the futures market and protect investors’ principal investments, the information alleges that Villalba represented that he would put stop orders in place. These stop orders would generally be orders to sell the futures contracts if it appeared that the investors were beginning to lose too much money.

The information alleges that Villalba did not put the stop orders in place as he represented and, as a result, lost millions of dollars of investor money. The information also alleges that Villalba converted millions of dollars of investor money for his own purposes, which included: (a) funding his Rico Latte coffee shops in Hudson and Stow, Ohio; (b) purchasing property in Vermillion, Ohio; and (c) making Ponzi-type payments to some of his investors.

In order to conceal market losses and his misuse of investor funds, the information alleges that Villalba sent numerous interstate e-mail communications to investors advising them of their current positions and the stop orders he put in place to protect their investments.

U.S. Attorney Dettelbach said, “This case serves as an example to the public that the Department of Justice and the Financial Fraud Enforcement Task Force will fight fraud in order to protect the integrity of the financial markets. If you lie to investors, there will be a steep price to pay. This case resulted from tremendous coordination between the Department of Justice and civil enforcement agencies to protect the rights of investors all over the country.”

If convicted, Villalba’s sentence will be determined by the court after a review of factors unique to this case, including his prior criminal record, if any; his role in the offense; and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum and, in most cases, it will be less than the maximum.

This case is being prosecuted by Assistant U.S. Attorneys Bridget M. Brennan and Henry DeBaggis after an investigation by the Cleveland Office of the FBI. The U.S. Attorney’s Office for the Southern District of California; the San Diego Office of the FBI; the U.S. Securities Exchange Commission, Los Angeles Regional Office; and the U.S. Commodity Futures Trading Commission, Kansas City, Missouri Office also assisted with this investigation.

This prosecution is sponsored by 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.

An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

http://cleveland.fbi.gov/dojpressrel/pressrel10/cl032910.htm

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