A New Jersey investment advisor was sentenced to 14 years in prison recently after pleading guilty to one count of securities fraud and use of manipulative and deceptive devices plus one count of transacting in criminal property.
According to Court Documents
Sandra Venetis, 60, the founding principal and president of Systematic Financial Associates Inc., a registered investment adviser located in Branchburg, N.J., defrauded investors — mainly retirees and unsophisticated investors — of more than $11 million by soliciting funds for a Ponzi scheme she ran for 13 years.
Venetis entered her guilty plea before Judge Joel A. Pisano of the U.S. District Court for the District of New Jersey in Trenton. Pisano also imposed the sentence.
In her plea, Venetis admitted that funds contributed by investors in her Ponzi scheme went to pay the operating expenses of Systematic Financial and its related entities. In addition, Venetis used new investor funds to make principal and interest payments to existing investors. Slightly more than 110 investors sent about $16.7 million to Venetis.
Sandra Venetis Stole Money for Personal Use
The money also went to bankroll Venetis’ lifestyle. Investor money was used to pay off gambling debts and for travel to such places as Alaska, Italy, France, India and the Caribbean. She also misappropriated investments to pay her mortgage, her property taxes and other personal expenses.
Sandra Venetis Sentenced to Prison & Pay Restitution
Beside the 14-year prison term, Venetis was sentenced to three years of supervised release and ordered to pay about $11.5 million in restitution to the victims of her crime.
SEC Charged Venetis
The Securities and Exchange Commission, or SEC, also charged Venetis. In September 2010, the SEC filed a complaint stating that she stole more than $11 million from retired clients or those unsophisticated about investments. Venetis has agreed to a settlement with the SEC that is pending court approval.
SEC Fraudulent Complaint
The SEC complaint stated that the offering fraud and Ponzi scheme was conceived and orchestrated by Venetis. From at least 1997, she used her company Systematic Financial and related entities to fraudulently obtain investments from at least 100 advisory and tax clients.
The scheme fraudulently offered and sold promissory note securities. Venetis made varied representations to prospective investors. For example, she said that she would invest the money in unspecified investment vehicles or notes, which she claimed went to fund loans to doctors or were related to Medicare payments. She also said the investments would generate annual returns ranging from 6 percent to 11 percent, that the returns would be tax-free because of a loophole in the tax code, and that doctors had personally acknowledged their obligation to repay the loans by co-signing the notes.
Venetis also claimed the notes were insured by the Federal Deposit Insurance Corporation and that her company Systematic Financial would pay the investors their principal upon maturity of the notes, minus any paid interest.
Venetis Forged Doctors’ Signature
“All these claims were entirely false”, the SEC complaint said. Venetis actually forged the signature of an actual doctor or signed the name of a fictitious doctor on the notes. The purported co-signatories had no knowledge of or involvement in the Ponzi scheme and received no proceeds from note offerings, the complaint said.
The notes offerings were not connected with any investments, assets, or related revenue. Venetis systematically misappropriated investors’ funds, and misused the proceeds of the notes offerings to pay the interest and principal owed to investors, to pay the operating expenses of her companies, and the aforementioned personal expenses.
The complaint showed the SEC sought to recover assets from three other defendants who had profited from Venetis’ activity: her daughter Jennifer Venetis, her brother Kevin Persley and Venetis LLC, an entity owned by Venetis.
The pending settlement includes a consent to a court order that freezes Venetis’ assets and requires monetary payments, including penalties to be determined later. Venetis also agreed to an SEC administrative action that bars her from future association with any investment advisor or broker-dealer, according a release issued by the SEC in September 2010.
Guiliano Law Group
If you have been the victim of securities fraud you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.