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Apr 07

Ex-CFO, accountant admit to Ponzi role

Posted by Stephen Taub in U.S. Attorneyfraudcompliance

Stephen Taub

The former chief financial officer and an accountant with Capitol Investments USA pleaded guilty to a count of securities fraud for their role in the operation of an $880 million Ponzi scheme linked to a fictitious wholesale grocery distribution business.

Roberto Torres, the CFO of Capitol, and Alejandro Torres, an accountant at Capitol, used the company to assist founder Nevin K. Shapiro in fraudulently obtaining $880 million between January 2005 and November 2009, according to US Attorney Paul J. Fishman.

They face up to 20 years in prison and a $5 million fine.

Shapiro pleaded guilty to one count of securities fraud and one count of money laundering on September 15, 2010.

The Torreses admitted in court that Capitol had virtually no income-generating business during that time, and that they assisted Shapiro in operating the Ponzi scheme by using new investor funds to make principal and interest payments to existing investors and to fund Shapiro's lavish lifestyle.

The pair admitted to creating, or directing others to create, fraudulent documents which falsely touted the profitability of Capitol's fictitious grocery diversion business. The Torreses admitted that those documents included: profit and loss figures fraudulently representing that Capitol's wholesale grocery business was generating tens of millions of dollars in annual sales; personal and business tax returns for Shapiro and Capitol also fraudulently reflecting those sales; and numerous invoices fraudulently reflecting transactions between Capitol and other companies in the wholesale grocery business.

The pair said more than 50 people lost a total of between $50 and $100 million as a result of the scheme.

The government said that beginning in January 2009, Shapiro and Capitol began failing to make required principal and interest payments to investors. Shapiro and Capitol were forced into bankruptcy in November 2009. At that time, they owed more than $100 million to victims.

Shapiro's sentencing is currently scheduled for May 13.

Sentencing for Roberto and Alejandro Torres is scheduled for July 12.

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