Four associates of a New York businessman convicted in a $400 million Ponzi scheme were arrested Wednesday on charges they pocketed nearly $38 million in commissions for their efforts in advancing the fraud, federal prosecutors said.
Three of the suspects were arrested without incident on New York's Long Island and a fourth was taken into custody in Florida, said FBI spokesman J. Peter Donald.
The three New York suspects _ Jason Keryc, 34; of Wantagh, N.Y.; Anthony Ciccone, 39, of Locust Valley, N.Y.; and Diane Kaylor, 36, of Bethpage _ made initial court appearances Wednesday in U.S. District Court in Central Islip.
Attorneys for Keryc and Ciccone declined to comment. Michael J. Schwed, an attorney for Kaylor, told a reporter before the proceeding: "She's innocent. She didn't do anything wrong."
A fourth suspect, Anthony Massaro, 40, of Boynton Beach, Fla., was arrested at his home. A date for his court appearance has not been announced.
The four were account representatives of Hauppauge-based Agape World Inc. and Agape Merchant Advance, according to a criminal complaint. The two investment companies were run by Nicholas Cosmo, who has pleaded guilty to mail and wire fraud charges in a scheme that bilked more than 4,000 investors in a $400 million Ponzi scheme.
Cosmo was called a "mini-Madoff" because he was arrested in January 2009, just weeks after the billion-dollar swindler Bernard Madoff was arrested in New York City. Unlike Madoff, who admitted cheating charities, celebrities and institutional investors out of billions, prosecutors said Cosmo's scheme targeted mainly blue-collar workers.
The complaint unsealed Wednesday alleges the four pocketed huge commissions for assisting Cosmo and Agape in running the scheme. Keryc, Massaro, Ciccone and Kaylor are accused of receiving commissions of approximately $16 million, $6.5 million, $10.7 million and $4.75 million, respectively.
Keryc, Ciccone and Kaylor did not enter pleas at their court appearance to mail fraud charges.
A judge scheduled a Friday court hearing to consider bail. Prosecutors had indicated they were willing to sign off on releasing the three on $1 million bail each, but Magistrate Judge E. Thomas Boyle demanded documentation that the properties offered as collateral for bail were legitimate.
Federal court documents show Massaro pleaded guilty in 1997 to one count of importing four pounds of heroin into Miami on a flight from Panama. The drugs were found hidden inside a carry-on bag. He was released from prison in June 2001.
Agape promised huge returns on investments, which were to be used only to fund specific, short-term secured bridge loans to commercial borrowers or to make short-term loans to small businesses, prosecutors said. They say the defendants knew that Agape and AMA did not produce or earn rates of return that could support the exorbitant returns promised to investors, but continued to solicit money from investors.
Prosecutors said that the defendants learned in November 2008 that all of Agape's 2007 bridge loans were in default or on extension, but the four allegedly failed to disclose that information to existing or new investors.
As investors became increasingly concerned about their investments, the four allegedly offered them a fictitious insurance policy, promising that those who purchased the insurance plan would own a portion of liens that purportedly secured repayment of the bridge loans. They raised approximately $865,000 for what turned out to be bogus insurance, prosecutors said.
At Cosmo's sentencing last fall, several people spoke about how they had lost their life's savings investing with Agape. The more than 4,000 victims include teachers, police officers, firefighters, nurses and construction workers.
"I'm going to be working until they put me in the grave," said one of the victims, Ellen Gabriel, of Yaphank, N.Y. The hairdresser said she lost $130,000 _ "my entire life savings."
Cosmo apologized at the sentencing, saying he never intended to hurt anyone.
Madoff is serving a 150-year prison sentence for his fraud.
Associated Press Legal Affairs Writer Curt Anderson in Miami contributed to this report.