SEC levels fraud charges against Woodbridge, ex-CEO Shapiro
After investigating the Woodbridge Group for the past year, the U.S. Securities Exchange Commission has announced charges and an asset freeze against the company, saying that it has been operating a $1.2 billion Ponzi Scheme.
The move by the SEC comes after at least six states including Colorado have accused Woodbridge of securities violations, some including fraud, over the past couple of years. It also follows the company’s recent declaration of bankruptcy and its CEO’s resignation.
The SEC charges included fraud and violations of the securities and broker-dealer registration provision of the federal securities law, according to the SEC. California-based Woodbridge is a major owner and developer of high-end properties in the Roaring Fork Valley, including numerous lots at Aspen Glen and River Valley Ranch in Carbondale.
The SEC filed a civil complaint Thursday in federal court in Miami claiming former CEO Robert H. Shapiro and his Woodbridge Group of Companies defrauded more than 8,400 investors.
Shaprio is a part-time Aspen Glen resident who has hosted numerous parties inviting conservative political luminaries such as Karl Rove, Rick Perry, former Milwaukee County Sheriff David Clarke and Fox News analyst Juan Williams.
A federal judge ordered a temporary asset freeze against Shapiro and his investment companies and ordered them to account for investor money.
“The SEC is seeking return of allegedly ill-gotten gains with interest and financial penalties,” according to the commission.
The SEC says Woodbridge claimed to operate a loan business that would pay investors returns of up to 10 percent annually. In reality, the SEC says it operated a classic Ponzi scheme in which newer investor money was used to pay older investors.
“We allege that, through aggressive tactics, Woodbridge and Shapiro swindled seniors into a business model built on lies, which the SEC’s Miami Regional Office staff moved to halt,” said Stephanie Avakian, co-director of the SEC’s enforcement division.
“Our complaint alleges that Woodbridge’s business model was a sham,” added Steven Peikin, another co-director of the SEC’s enforcement division. “The only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.”
“Our complaint further alleges that Shapiro used a web of layered companies to conceal his ownership interest in the purported third-party borrowers,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “Shapiro used the scheme to line his pockets with millions of investor dollars.”
“The scheme collapsed in typical Ponzi fashion in early December as Woodbridge stopped paying investors and filed for Chapter 11 bankruptcy protection,” according to the SEC.
SEC investigators say that Woodbridge also paid $64.5 million in commissions to sales agents for marketing these investments as “low risk” and “conservative” investments.
They allege that Shapiro “diverted at least $21 million for his own benefit, including to charter planes, pay country club fees and buy luxury vehicles and jewelry,” according to an SEC release.
In November, the Post Independent learned that the SEC was investigating Woodbridge for fraud. And, the commission was looking at 235 LLCs that investigators believed to be owned or controlled by Shapiro.
The LLCs are allegedly interwoven into Woodbridge’s investment products, and investigators believe these companies are owned or controlled by Shapiro, according to an SEC court filing.
Last month, Woodbridge closed its office in the Aspen Glen residential neighborhood about 3 miles north of Carbondale. The Post Independent also reported earlier this week that neighboring homeowners at Aspen Glen, River Valley Ranch and other developments where Woodbridge owns property would likely have to pick up HOA dues if those properties are seized.
A federal court hearing is next scheduled for Dec. 29. The SEC has requested that the asset freeze continue.
The Associated Press contributed to this report.
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Robert Shapiro was sentenced to the maximum 25 years in prison for running a $1.3 million real estate Ponzi scheme that claimed more than 7,000 victims.