Mastermind of $1.3 Billion Investment Fraud Scheme Charged

Mastermind of $1.3 Billion Investment Fraud Scheme Charged

The U.S. Attorneys Office announced, Sherman Oaks, California native, Robert Shapiro, 61, pled guilty to orchestrating and leading a massive investment fraud scheme, in which more than 7,000 victims suffered financial losses, as well as tax evasion, in violation of 18 U.S.C. § 1349 and 26 U.S.C. § 7201.  Shapiro is the former owner, president, and CEO of Woodbridge Group of Companies LLC (“Woodbridge”). Shapiro is scheduled for sentencing on October 15, 2019, at 8:30 a.m. before United States District Judge Cecilia M. Altonaga.  He faces a possible maximum sentence of 25 years in prison.

Ariana Fajardo Orshan, U.S. Attorney for the Southern District of Florida, George L. Piro, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, Michael J. De Palma, Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), and the Florida Office of Financial Regulation (OFR), made the announcement.

According to the indictment and court documents, Shapiro spearheaded and concealed an enormous Ponzischeme through his business, Woodbridge.  Woodbridge employed approximately 130 people and had offices located throughout the United States, including in Boca Raton, Florida; Sherman Oaks, California; Colorado; Tennessee; and Connecticut.  The scheme ran from at least July 2012 to December 2017, when Woodbridge filed for Chapter 11 bankruptcy and defaulted on its obligations to investors.

Throughout the conspiracy, Woodbridge’s main business model was to solicit money from investors and, in exchange, issue investors promissory notes reflecting purported loans to Woodbridge that paid high monthly interest rates.  Woodbridge falsely claimed that these investments were tied to real property owned by third parties and that the third parties would be making the interest payments to Woodbridge and its investors; it was portrayed as an investment in a hard-money lending business.  Using high pressure sales tactics, Shapiro and his co-conspirators marketed and promoted these investments as low-risk, safe, simple, and conservative.  And at minimum, investors were made to believe that Woodbridge’s real estate dealings would generate the funds used to pay the return on their investments.

Despite Woodbridge’s claims that these investments would be backed by properties owned by third-parties, in fact, to the extent that the properties existed, they were secretly owned by Shapiro.  Unbeknownst to investors, Shapiro created and controlled a network of more than 270 limited liability companies, which he used to acquire and sell the properties pitched to investors.

Shapiro and his co-conspirators falsely claimed that Woodbridge was profitable and advertised high rates of return to investors.  However, Shapiro’s real estate portfolio failed to generate sufficient cash flow to satisfy the loan obligations and interest payments owed to investors.  To make up for the cash deficiency, Shapiro and his co-conspirators resorted to making Ponzi payments, i.e., hundreds of millions of dollars invested by new investors were used to pay “returns” to older, existing Woodbridge investors.  In some instances, Shapiro made these fraudulent “interest” payments even when the advertised investment properties were never acquired.

The Woodbridge sales operation functioned as a “boiler room” and featured high-pressure sales tactics, deception, and manipulation.  Woodbridge promoted investments through telephone and in-person conversations, emails and website displays.  The scheme also involved misrepresentations to financial planners who helped Woodbridge to sell investments to potential investors.

At least five states issued cease and desist orders against one or more of the Woodbridge entities based on their unregistered sale of securities. Shapiro and his co-conspirators nonetheless continued to sell Woodbridge investments to residents of those states, and engaged in deceptive conduct with respect to pending state regulatory actions against Woodbridge, in violation of the cease and desist orders.

At some point in 2017, Shapiro made the decision that Woodbridge would file for bankruptcy. Without disclosing to investors that Woodbridge was insolvent and on the verge of bankruptcy, Shapiro caused Woodbridge to collect additional money from investors through the filing of Woodbridge’s bankruptcy in December 2017.  Shapiro also admitted that, immediately prior to Woodbridge’s bankruptcy filing, he diverted millions of dollars in investor funds to several bank accounts opened in the name of his wife, J.S., which he used for new ventures.

In total, Shapiro and his co-conspirators convinced more than approximately 9,000 investors to invest more than $1.29 billion to Woodbridge.  According to the Indictment, at least 2,600 of these investor victims invested their retirement savings, totaling approximately $400 million.  Of that, Shapiro misappropriated approximately $25 million to $95 million in investor money for himself and for the benefit of his immediate family members.  Shapiro spent millions on personal expenditures, such as $3.1 million for chartering private planes and travel, $6.7 million on a personal home, $2.6 million on home improvements, $1.8 million on personal income taxes, and over $672,000 on luxury automobiles.  Shapiro further admitted that he used bank accounts and credit cards opened in the name of his wife, J.S., to divert millions of dollars to his family.

Shapiro also pled guilty to tax evasion based upon his failure to pay more than $6 million in taxes due and owing to the IRS for calendar years 2000 through 2005.

As part of his plea, Shapiro and his wife agreed to forfeit certain assets, many of which were seized during a search executed by federal agents at his home in Sherman Oaks, California.  They include, but are not limited to: artworks by Pablo Picasso, Alberto Giacometti, Marc Chagall, and Pierre-August Renoir; a collection of 603 bottles of wine; a 1969 Mercury convertible; luxury jewelry, including a pair of 14-karat, white gold earrings with two black diamonds (61.81 carats), two grey diamonds (23.92 carats), two rose-cut diamonds, and 266 round diamonds; a platinum ring with an oval-cut ruby (10.91 carats), two trapezoid diamonds and 70 round-cut diamonds; a platinum ring with certified Colombia emerald-cut emerald (9.54 carats), trapezoid-cut diamonds, and 166 round-cut diamonds; and other items detailed in court documents.

The indictment also charged two co-defendants, Dane Roseman, a/k/a “Dayne Roseman,” and Ivan Acevedo, who are scheduled for trial in February 2020.  The U.S. Securities and Exchange Commission (SEC) filed parallel civil enforcement actions against Woodbridge, Shapiro, his wife, and co-defendants Acevedo and Roseman related to the Ponzi scheme.

U.S. Attorney Fajardo Orshan commended the investigative efforts of the FBI, IRS-CI and OFR in this matter.  She thanked the SEC Miami Regional Office and the U.S. Attorney’s Office for the Central District of California for their assistance.  This case is being prosecuted by Assistant U.S. Attorneys Roger Cruz and Lisa H. Miller.  Assistant U.S. Attorneys Nalina Sombuntham and Alison Lehr are responsible for the asset forfeiture component of the case.

Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.

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