April 27, 11

NEWS / Investment Adviser Pleads Guilty to $13.6 Million Fictitious Investment Program Scam

TRENTON, NJ—The owner of Branchburg, New Jersey-based investment adviser Systematic Financial Associates, Inc., admitted today to defrauding over 50 investors of more than $7 million by soliciting investments in a fictitious investment program, U.S. Attorney Paul J. Fishman announced.

Sandra Venetis, 59, of Whitehouse Station, N.J., pleaded guilty to an Information charging her with one count of securities fraud and one count of transacting in criminal property. She entered her guilty plea before U.S. District Judge Joel A. Pisano in Trenton federal court.

According to documents filed in this case and statements made during Venetis’ guilty plea proceeding:

From 1997 through August 13, 2010, Venetis solicited clients of Systematic Financial Associates to invest in an alternative investment program she allegedly operated outside her registered investment advisory business. Venetis admitted that to induce victim investors, she falsely told them she would use their money to fund loans to doctors for their quarterly pension plans. At times, Venetis directed Systematic Financial Associates’ advisory clients to liquidate positions in securities to participate in the alternative investment program. As a result of her solicitations, approximately 127 investors sent approximately $13.6 million to Venetis.

Venetis admitted that she did not operate any legitimate investment program outside of Systematic Financial Associates’ advisory business, and created a corporation called Systematic Financial Services, Inc., solely for the purpose of operating her fraudulent scheme. Venetis never transferred any investment money to doctors, and concealed her fraudulent conduct by creating fictitious doctors or forging the names of real doctors on promissory notes that made it appear she was using investor funds as promised.

Venetis admitted to using investor funds to pay the operating expenses of Sytematic Financial Associates and using new investor funds to make principal and interest payments to existing investors in Ponzi-scheme fashion.

Venetis also admitted that she stole money to fund her own lavish lifestyle, using victims’ investments to pay for gambling debts in Las Vegas and elsewhere, as well as trips—including to Alaska, Italy, France, India and the Caribbean. She also misappropriated investments to pay her monthly mortgage, property taxes and other personal expenses. Investors lost at least $7 million as a result of the scam.

The securities fraud count carries a maximum potential penalty of 20 years in prison and a $5 million fine. The transacting in criminal property count carries a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the pecuniary gain to Venetis or the loss to the victims of the offense. Sentencing is scheduled for August 3, 2011.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, and IRS—Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, for the investigation which led to today’s guilty plea. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office, under the direction of George S. Canellos.

The government is represented by Assistant U.S. Attorney Justin W. Arnold of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

This case was brought in coordination with 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.

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Defense counsel: Robert Stevens Esq., Princeton, N.J.

http://newark.fbi.gov/dojpressrel/pressrel11/nk042611a.htm

Tags: document, criminal investigation, corporation,