Massive Securities Fraud and Ponzi Scheme Are Alleged in Florida

Hialeah, FLA massive securities fraud that has been described in terms ranging from stock investment fraud to a mushrooming Ponzi scheme has been uncovered in the Sunshine State, according to the August 9th edition of the Miami Herald. Luis Felipe Perez was indicted last week on federal charges, accused of conspiring with two others in a scheme to fraudulently obtain millions of dollars in commercial lines of credit.

The Herald reports that Perez was already facing federal charges related to an alleged pyramid scheme, when the indictment was announced.

Perez ran jewelry businesses in Hialeah that were described, according to federal officials, as a sham. His companies are alleged to have had no employees. Diamonds offered to investors as collateral were alleged to be fake. The accused is alleged to have taken part in a $12 million bank fraud conspiracy, and orchestrated a Ponzi scheme worth $40 million.

According to the Securities and Exchange Commission, which conducted the investigation, Perez and his wife purchased a Coral Gables villa worth $3.2 million, and spent $400,000 on luxury cars, $300,000 on clothes for his wife, $200,000 each on vacations and 'extravagant' dinners respectively, and $100,000 on art.

All these purchases were allegedly financed, through investment fraud, by money belonging to investors.

The alleged Ponzi scheme involved a swindle of about 35 investors who were promised rates of return up to 120 percent per annum in exchange for investing in Perez's jewelry businesses, then in New York-based pawnshops. The Ponzi scheme is alleged to have operated from 2006 through May of last year. As a result Perez faces a civil complaint by the SEC and six federal counts of securities fraud.

Each count carries a maximum of 20 years in prison.

It is also alleged that Perez helped orchestrate a $12 million bank-fraud conspiracy with accountant Berta Sanders, 61, of Miami Lakes, and Richard Garcia, 29, of Miami, a former loan officer at Wachovia Bank (now Wells Fargo).

According to the indictment filed last week, Sanders prepared at least 25 fraudulent loan applications on behalf of borrowers to gain commercial lines of credit, totaling $12 million. Garcia told Sanders what information needed to be faked to gain the credit. Perez recruited borrowers, who allegedly paid Sanders 10 percent of the loan amounts for her help. Sanders shared $134,000 with Garcia, who faces six counts of receiving gifts to procure loans. The bank allegedly incurred $10 million in losses after borrowers defaulted on most of the lines of credit. Perez, Sanders and Wachovia Bank face a civil suit in Miami-Dade Circuit Court. Perez is currently in custody.

Such examples of securities fraud, and the potential for securities fraud litigation in this case, will hopefully send the message that not only is such activity unlawful—but in an age of economic uncertainly, is an act of cruelty towards investors who can ill afford the financial losses, or the time to recover from them.