Thursday, December 9, 2010

85 Years in Prison for Fraud

Mark Alan Shapiro, 50, Avon, Massachusetts, the founder of the Cobalt Companies was sentenced to 85 years in prison on charges stemming from a fraud that raised more than $23 million from over 250 investors in private placement real estate offerings. Shapiro was sentenced in Manhattan, New York, federal court by U.S. District Judge Kimba M. Wood, who presided over the three-week jury trial at which Shapiro, along with co=defendants Irving Stitsky and William B. Foster, was found guilty.
Beginning in late 2003, Shapiro, Stitsky, and Foster founded a group of companies that operated under the name "Cobalt," which purportedly engaged in the acquisition and
development of multi-family real estate properties throughout the United States. Through the Cobalt entities, Shapiro, Stitsky, and Foster fraudulently induced victims to invest by, among other things: (a) misrepresenting Cobalt's operating history; (b) failing to inform prospective investors that Cobalt was owned and controlled by Shapiro and Stitsky, both convicted felons; and (c) misrepresenting and causing others to misrepresent Cobalt's purported ownership interests in certain properties to prospective investors. In fact, Cobalt was a new company with little or no record of real estate investment success, was managed and controlled by Shapiro and Stitsky, and did not own several of the properties that it claimed to own.

In order to carry out their scheme, Shapiro, Stitsky, and Foster established Cobalt's corporate headquarters in Springfield, Massachusetts, a satellite Cobalt office in Miami, Florida, and a telemarketing center in Great Neck, New York. Shapiro controlled and managed all aspects of Cobalt's Massachusetts and Florida offices, while Stitsky was in charge of the telemarketing center in New York. The defendants and their employees solicited funds from investors by making false and misleading oral and written representations about, among other things, the investment for which the investors' funds were solicited, and the identities and relevant background information about the individuals controlling the Cobalt entities.

In addition, in furtherance of the scheme, Shapiro and Foster created and sent false financial statements and fake account statements that purported to show that Shapiro had liquid assets in excess of $3 million.

In addition to the prison term, Judge Wood sentenced Shapiro to three years of supervised release and ordered him to pay $22,075,631 in restitution and to forfeit $23,152,235 in proceeds from his offenses.

Irving Stitsky, 56, Milan, New York, was sentenced to 85 years in prison on July 6, 2010, and William B. Foster, 70, East Hampton, Massachusetts, was sentenced to 3 years in prison on September 22, 2010.

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