Brother-in-Laws Indicted for Multi-Million Dollar Ponzi scheme
However, in the small print at the bottom of the Website’s home page you’ll also notice a message that states “Please Note: While there has been some unsettling reports surrounding the Panoramic View the resort continues to operate normally while these issues are being resolved. We look forward as always to serving our guests and residents.”
The “Panoramic View”, located off Old Montauk Hwy, in Montauk New York offers all the amenities a five star resort can provide. The property is carved into a sea cliff on the easternmost end of Long Island within range of the roaring depths of the Atlantic Ocean. The land itself sits on what is said to be worth in excess of tens of millions of dollars.
Brian R. Callahan, 43, an investment fund manager and his brother-in-law, Adam J. Manson, 41 a real estate developer, both of Old Westbury, NY, had aspirations of buying an interest in the expansive resort. And they did just that in 2007, at a time that the area seemed to be attracting new clientele and freshly interested visitors. But today, an indictment was unsealed in the United States Courthouse in Central Islip showing that the property was purchased with mostly other people’s money.
According to the 24-count indictment, charging Callahan and Manson with securities and wire fraud by way of using cash assets from the investment funds that Callahan controlled, and using the money to pay down debt on the complex. As it turns out the entire financing and renovation of the “Panoramic View” was bankrolled by a multi-million dollar Ponzi scheme which began years before the brother-in-laws’ interest in the property was piqued.
After Manson bought the property, acquiring loans and using monies from Callahan s investment funds, they were not able to sell enough of the units to generate a profit. Essentially, they weren’t able to break even and their entire venture was continuously under water.
Callahan managed four different investment funds, supported by over $118 million that were infused with the cash of at least 40 stakeholders who believed their money was being placed into safe asset vehicles such as mutual funds, hedge funds and other low-risk securities. Between 2006 and 2012 he allegedly combined the monies from the individual funds together, to pay returns to the investors, misleading them into believing that his methods appeared to be sound. By the end of 2011, the funds in their entirety had an actual value of less than ten percent of the investors’ original investment, prosecutors said.
The indictment also states that Callahan used some of the cash from the four funds to purchase luxury items for his own personal use. Expensive cars and posh houses which are located in Westhampton and Old Westbury, Long Island were some of the high-ticket items that were cited. The indictment also points out that Manson managed the Panoramic View property and moved the funds that were transferred by Callahan into the beleaguered real estate venture without the investor’s knowledge.
According to prosecutors, one group of the investors was the Montauk Fire Department. They gave Callahan over a half a million dollars to invest in what they believed were to be mutual funds and other safe securities. However, that money never made it into any brokerage accounts. Instead, it was sidetracked to Panoramic View to assist in helping the defendants pay down debt on the property. The fire department was sent bogus account statements showing that the money they invested was doing well.
Callahan sent false account statements to all of the investors showing that their investments were accomplishing what they expected or more. He continually lied to them about both the type and standing of the actual status of their investments.
Now, the government has moved to forfeit the defendants’ interest in the resort as well as seizing over $1 million of proceeds and liquid assets allegedly acquired criminally through the Ponzi scheme executed by the collaborators.
United States Attorney Loretta E. Lynch recounted the defendant’s actions as follows: “As alleged, the defendants used one of Long Island’s landmarks, the Panoramic View Resort; to perpetrate a wide-ranging fraud. Callahan gave his word that he would invest his clients’ funds safely and responsibly in established vehicles. Instead, he simply stole the funds to prop up his partner’s failing investment. To conceal their status as business failures, the defendants employed all the tricks in the typical con man’s bag. They created fake documents, stole a person’s identity and engaged in forgery. The defendants allegedly lied to the lender, they lied to the auditor, and Callahan repeatedly lied to his investors. The lies stop now.”
After being arraigned yesterday, before United States Magistrate Judge A. Kathleen Tomlinson, Callahan and Manson both pleaded not guilty. Mr. Callahan was freed on $2 million secured bond, and Mr. Manson was released on secured bond of $1 million.
In a statement issued by FBI Assistant Director-in-Charge George Venizelos it was announced, “Allegedly, Mr. Callahan and Mr. Manson violated the trust of their clients, stealing victims’ hard earned money to perpetuate their fraud. Instead of investing the funds as promised, Mr. Callahan used the deposits to perpetuate the scheme, all while buying luxury cars and an estate in Westhampton. Mr. Callahan was so indiscriminant, he even stole from a Long Island Fire Department. Today, the game is up. The FBI will continue working to protect investors and stop alleged fraudsters.”
Further, IRS Special Agent-in-Charge Toni Weirauch said, “The architects of Ponzi-type schemes often employ a variety of sophisticated measures to keep them operating without detection. However, the cooperation between IRS-Criminal Investigation, the U.S. Attorney’s Office, and the FBI should give the investing public confidence that such schemes will ultimately be uncovered and thoroughly investigated, and that the scammers will be prosecuted.”
United States Attorney Lynch also gave credit and thanks to the British Virgin Islands Financial Investigation Agency as well as the Securities and Exchange Commission for their support and backing in the course of the investigation.
A guilty verdict for either of these charges can carry penalties of extensive fines and lengthy terms in federal prison. If you, a family member or friend is accused of any of these types of crimes it is imperative that you retain an expert criminal defense attorney with a broad understanding of securities fraud, wire fraud and all other areas of federal criminal law.
Mr. Cohen’s extensive years of practice as a criminal trial attorney as well as his many years of working for the prosecution on both a state and federal level make him a clear choice to fight charges by what is now his opposition as described in this article.
You can contact Mr. Cohen by email by clicking here or call him at any of the phone numbers listed at the top of this page as well as all other pages of this Website.