SEC secures $230M in Conn. fraud investigation

AP News
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Posted: Jun 28, 2011 7:07 PM
SEC secures $230M in Conn. fraud investigation

Federal financial regulators have secured $230 million from an offshore bank account linked to a Connecticut-based financier who's accused of running a massive investment fraud, authorities said Tuesday.

The Securities and Exchange Commission said the money should help victims of Francisco Illarramendi, a Venezuelan-American accused of running a pyramid scheme that exposed investors to hundreds of millions of dollars in potential losses. A pension fund for Venezuela's state oil workers accounted for most of the investment.

"We're pleased with the return of this money to the U.S. and believe it will help preserve these assets for the benefit of defrauded investors," said David P. Bergers, director of the SEC's regional office in Boston.

Illarramendi, who lives in New Canaan, Conn., faces up to 70 years in prison after pleading guilty in March to criminal charges including several counts of fraud and conspiracy to obstruct justice. He was accused of transferring money among investment accounts without telling clients to cover up huge financial losses and then falsifying documents to deceive investors, creditors and investigators.

The money in the account in the Netherlands came from one of Illarramendi's firms, Highview Point Partners LLC, of Stamford, Conn., which was added as a defendant in the case in May. Three hedge funds managed by the firm were suspected of holding money tainted by the pyramid scheme.

A New York-based attorney for the hedge funds, Michael Swartz, said they are not accused of wrongdoing and they opposed the transfer of funds from their bank account in Amsterdam to their bank account in New York.

"The Highview Point Funds will continue to vigorously defend their interests in this proceeding," Swartz said.

A federal judge in Connecticut on June 16 ordered a freeze of the hedge funds' assets, including the $230 million, and ordered them returned to the United States. The money was received last week, the SEC said in a court filing Tuesday.

The New York attorney assigned to secure victims' assets, John Carney, has a Sept. 30 deadline to file his accounting. At the end of March, the balance in the receivership account was about $5.1 million, according to court documents.

An attorney for Venezuela's state-owned oil company, Petroleos de Venezuela, did not respond immediately to a message seeking comment.

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Associated Press writer Marcy Gordon contributed to this report from Washington, D.C.