US: US money manager accused of porn-linked fraud
Wed Sep 9 05:14:11 EST 2009
Tue Sep 8 19:14:11 UTC 2009
WASHINGTON, Sept 8 AFP - A New York fund manager was accused on Tuesday of running a $US40 million ($A46.77 million) fraudulent investment scheme that pumped clients' money into a pornography mail order business, officials said.
Philip Barry and his firms Leverage Group, Leverage Option Management and North American Financial Services "defrauded" 800 investors, including senior citizens and retirees, through a Ponzi scheme, according to the Securities and Exchange Commission (SEC), a top financial watchdog.
A Ponzi scheme usually pays returns to investors from their own money or money paid by subsequent investors, rather than from any actual profit earned.
Barry's scheme was similar to that run by confessed swindler Bernie Madoff, serving a 150-year prison sentence for a multi-billion-dollar investment fraud that cheated thousands of people and institutions over several decades.
Barry, a Brooklyn money manager, provided fake account statements to investors that recorded growing account balances and concealed that he had not been trading securities at all for several years, the SEC said in a statement.
The commission alleged that Barry diverted investor funds for his own personal use - purchasing real estate, paying expenses of a separate mail order business that sold pornographic materials, and supporting his lifestyle.
"Barry was an unscrupulous and unregulated investment manager who lured victims with false promises of investment safety, lofty performance, and liquidity," said George Canellos, director of the SEC's New York regional office.
Barry and his companies, without admitting or denying the allegations in the complaint, "agreed to settle the SEC's claims against them and consented to the entry of a judgment," the SEC said.
The settlement, subject to approval by the court, could result in him paying penalties to be determined at a later date, it said.
Separately, the US Attorney's Office announced criminal charges against Barry for the same misconduct alleged in the SEC's complaint, the statement said.
