Connecticut Ponzier Guilty of Fraud

Francisco Illarramendi

Score another victory against hedge fund crime for federal prosecutors. Yesterday, fund manager Francisco Illarramendi pleaded guilty to fraud and conspiracy charges in federal court in Bridgeport, Connecticut. The U.S. Attorney, David Fein, has also charged two Venezuelans as co-conspirators in the Ponzi scheme.

The two men, Juan Carlos Guillen Zerpa and Juan Carlos Horna Napolitano, allegedly tried to obstruct an investigation into Illarramendi’s Michael Kenwood Group fund by the Securities and Exchange Commission. They are both behind bars, having been denied bail.

Apparently, the two men concocted a phony accountant’s letter attesting to $275 million in non-existent fund assets. The going rate for the forgery was $3 million.

Illarramendi centered his Ponzi efforts in his Short Term Liquidity Fund, which had over half a billion dollars under management. The scheme, dating back to 2006, saw Illarramendi stealing over $50 million for personal use. He also funneled the money to other businesses he ran.

Illarramendi was initially sued by the SEC in January 2011. He could be spending up to 70 years in the Big House. His two buddies are each up for a quarter (century) fabricating license plates.

Fein released a statement declaring "We believe this case represents the largest white-collar prosecution ever brought by this office.”

UPDATE
The SEC has now charged Illarramendi with civil fraud for his Ponzi scheme, which was worth hundreds of millions of dollars. "Illarramendi knew the SEC was on to his scheme and compounded his fraud by attempting to mislead the Commission's staff," said David Bergers, head of the SEC's office in Boston.


Eric Bank, Freelance Writer