FBI: 2 arrested in NY in $100 million Ponzi scheme
Aug 1, 2013, 9:02 PM
CENTRAL ISLIP, N.Y. (AP) – A New York investment fund manager and his brother-in-law were arrested Thursday and charged with running a multimillion-dollar Ponzi scheme that siphoned investors’ money in order to finance the men’s interest in an eastern Long Island condominium resort.
Among the bilked investors was an unnamed volunteer fire department on Long Island, which lost $600,000, court papers said. An unidentified Maryland investor lost $11 million, according to the indictment.
Brian R. Callahan, 43, and Adam J. Manson, 41, were charged in an indictment unsealed in U.S. District Court in Central Islip with wire fraud, securities fraud and conspiracy to commit securities fraud. Callahan also faces two counts of identity theft, according to the indictment.
Attorneys for both men entered not guilty pleas at their arraignments Thursday. Callahan was released on $2 million bond after his relatives put up three of their Southington, Conn., homes as collateral. Manson was released on $1 million bond; his father put up his Old Westbury, N.Y., home as collateral.
The two men also were ordered to surrender their passports.
Magistrate Judge A. Kathleen Tomlinson made an exception to a standard order requiring the two men to stay away from each other, saying because they were related by marriage _ Callahan is married to Manson’s sister _ they would be permitted to attend family functions while awaiting trial. Tomlinson, however, instructed both men they were not to discuss the case outside the presence of their attorneys.
Neither man spoke to reporters after the court proceeding.
Callahan, Manson and Callahan’s wife, Sheri Manson Callahan, were named in a 2012 Securities and Exchange Commission complaint related to the same scheme. Manson Callahan was not named in the federal criminal indictment unsealed Thursday.
Callahan raised more than $118 million from at least 40 investors between 2006 and 2012, federal prosecutors say. Despite assuring the investors the money would be invested in mutual funds, hedge funds and other securities, Callahan “siphoned off” about $96 million, prosecutors said.
Some of the money was used to purchase the Panoramic View, described in court papers as “an unprofitable 117-unit beachfront resort and residence development in Montauk, N.Y.” The resort, on the far eastern tip of Long Island, is co-owned by Manson, who is charged with lying to an auditor looking into Callahan’s investment funds, allegedly providing fake documents, bogus promissory notes and doctored balance sheets.
Callahan used some proceeds from the alleged scheme to keep the Ponzi scheme afloat by making partial payments to early investors, prosecutors said. He also allegedly purchased luxury items, including expensive cars and homes in Old Westbury and Westhampton, N.Y.
He also allegedly sent fake account statements to investors claiming their investments were performing well.
If convicted, the defendants could face more than 20 years in prison and millions of dollars in fines. Prosecutors also said they intend to commence forfeiture proceedings on the Panoramic View resort, as well as Callahan’s Old Westbury residence and Manson’s beachfront condominium in Westhampton.
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