ALMS and Grand-Am team owner Loles target of fraud case
The indictment was returned yesterday, November 30. LOLES has been detained since his arrest by the Federal Bureau of Investigation on December 15, 2009.
The indictment alleges that LOLES owned Apeiron Capital Management, Inc., which was an investment adviser and broker dealer registered with the U.S. Securities and Exchange Commission from 1995 through 1998, at which point the registrations were cancelled. However, LOLES continued to operate Apeiron as an unregistered investment adviser and falsely represented Apeiron to be a registered investment management firm. LOLES also was the majority owner and managing member of Farnbacher Loles Motor Sports, Farnbacher Loles Racing, Farnbacher Loles Street Performance, and various other Farnbacher Loles businesses, which were based in Danbury. Farnbacher Loles was engaged in the business of professional race team operations and servicing high-performance automobiles.
The indictment alleges that LOLES falsely represented to numerous victim-investors, including friends and fellow parishioners of a Church in Orange, Connecticut, that he would act as their investment adviser and invest their funds through Apeiron in various securities including in what he described as "Arbitrage Bonds," which LOLES represented would provide investors with a safe and steady return. LOLES also was selected to serve on the board of the Church's Endowment Fund and was entrusted to manage the Church's investment funds, including the Endowment Fund and the Building Fund, by investing in, among other things, Arbitrage Bonds. However, the Arbitrage Bonds did not exist.
It is alleged that LOLES caused numerous victim-investors to invest more than $10 million with him and Apeiron. LOLES failed to invest the money as represented, and instead diverted investors' funds for his own personal use and benefit, including to pay personal expenses such as credit card bills, and to distribute a large amount of the funds to Farnbacher Loles.
It is alleged that some of the individual investors provided LOLES with funds that had previously been invested in IRAs, 401(k)s, or were proceeds of life insurance payments.
As part of the alleged scheme to defraud, LOLES provided investors with fraudulent account statements and also made periodic "lulling" payments to certain investors using a portion of other victim-investors' funds.
The indictment also alleges that LOLES defrauded clients of Farnbacher Loles.
The indictment charges LOLES with seven counts of mail fraud, 10 counts of wire fraud, nine counts of securities fraud, and six counts of money laundering. The mail fraud, wire fraud and four of the money laundering charges carry a maximum term of imprisonment of 20 years. Two of the money laundering charges carry a maximum term of imprisonment of 10 years, and the securities fraud charges carry a maximum term of imprisonment of five years.
The U.S. Attorney stressed that an indictment is only a charge and is not evidence of guilt. Each defendant is entitled to a fair trial at which it is the government's burden to prove guilt beyond a reasonable doubt.
This case is being investigated by the Federal Bureau of Investigation, with the assistance of the U.S. Securities and Exchange Commission. The case is being prosecuted by Assistant United States Attorney Michael S. McGarry.
This prosecution falls under the umbrella of the President's Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The Task Force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.
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| You might not see his Porsche cars in ALMS anymore |
12/17/09 Gregory P. Loles, accused of making off with millions of dollars from St. Barbara’s Greek Orthodox Church parishioners and from the church itself, voluntarily surrendered to federal authorities Tuesday and faces mail fraud and wire fraud charges.
According to the church’s attorney and federal court documents released Tuesday, Loles, 50, of Easton allegedly made off with more than $2 million from three parishioners, and likely millions more from the Orange church. Loles, who was in charge of the church’s investments, including managing the building fund and endowment, allegedly used church funds targeted for charitable acts and scholarships to bankroll his private businesses. They included Farnbacher-Loles Motor Sports, a high-performance car racing team based in Danbury, court documents say.
“I don’t believe this is going to give any parishioner any particular satisfaction and pleasure, nor should it," Greg Stamos, a parishioner and general counsel for the church, said of Loles’ arrest.
Federal officials say the investigation is ongoing, and are urging other victims to come forward.
U.S. Department of Justice spokesman Thomas Carson declined to comment on how much Loles allegedly took from the church through fraud. Carson said all that is known is “several millions" of dollars are gone through fraud, and it appears none of the invested funds remain.
Three church members invested $3.1 million with Loles, but Loles did make some payments to parishioners and the church, so it’s unclear how much money is gone, Carson said. He said the FBI has calculated that Loles stole at least $2 million in investor funds, and likely more.
In a prepared statement, the church’s attorney, Joseph Martini of New Haven, said, “St. Barbara Greek Orthodox Church very much appreciates the speed with which the federal law enforcement authorities responded to, and investigated, the situation involving Gregory Loles.
“While we recognize that this will continue to be a difficult time for everyone concerned, including the church and its parishioners, we are hopeful that the arrest today of Mr. Loles will be the first step in a process that will result in the victims of Mr. Loles’ fraud receiving restitution for their losses," Martini said.
He also said late Tuesday it’s too early to tell exactly how much money was stolen from the church, as officials are conducting their own forensic accounting, but it’s at least “millions of dollars," according to statements in federal court Tuesday.
“Of course, we hope that once we determine our losses we, along with any other victim, will receive restitution," Martini said.
According to federal documents, Loles began embezzling money from the church and individual parishioners in November 2001. Loles admitted to federal agents that he did not invest the funds he received, the arrest warrant affidavit says. Loles admitted none of the funds are left, documents say.
Loles, who operated Apeiron Capital Management, first joined the church in the mid-1990s, and was elected to serve on the board of the church’s Endowment Fund. The fund held a significant amount of the church’s funds, which were used for scholarships and charitable acts.
At some point, the church’s board gave Loles, who was thought of as an expert stock broker, federal documents say, “authority to trade on behalf of the endowment fund." Loles told the board he was making the church money, and “word spread throughout the church community about Loles’ purported success," and individual parishioners hoped he would make them money, too, the arrest warrant affidavit says.
Loles told other members of the church he could guarantee a significant return through investing in high-yield bonds in which the principle would be safe, and he promised a 7 percent to 8 percent annual return, the arrest warrant affidavit says.
One parishioner invested $100,000, another $1 million, and a third $2 million. In all three cases, Loles purportedly purchased Knightsbridge Holding ARB bonds, but no such bonds exist, documents say. He used the investment principle to falsely create the appearance of the investment returns that he was representing, the warrant affidavit says. He also created false statements on his computer and sent them to investors.
Loles was interviewed by the FBI Dec. 9 and admitted that none of the investors, including the church, actually held a bond at Knightsbridge Holdings ARB, federal documents say.
Loles also told investigators that investors did not know they were “underwater," and that there were no individual accounts and no bonds generating the expected and promised returns, the documents say.
Loles appeared before U.S. Magistrate Judge Holly B. Fitzsimmons in Bridgeport Tuesday and is detained pending a hearing at 3 p.m. Friday in federal court in Bridgeport. If convicted, Loles faces a maximum of 20 years on each count.
Individuals who believe they may be a victim of Loles’ scheme, or anyone with information related to the case, is asked to contact the FBI at 203-777-6311. See full Affidavit