New York (HedgeCp.Net) – Venezuelan-American Francisco “Pancho” Illarramendi has been sentenced in Bridgeport, Conneticut to 156 months of imprisonment, followed by three years of supervised release, ABC reports.
Illarramendi was convicted of orchestrating a Ponzi scheme that defrauded investors and creditors of hedge funds he managed out of hundreds of millions of dollars, and for obstructing the investigation of his conduct.
“For more than five years, Francisco Illarramendi’s severely misguided attempt to conceal an initial loss of $5 million ballooned into an elaborate fraud scheme that caused investors and creditors to lose hundreds of millions of dollars,” stated First Assistant U.S. Attorney Michael J. Gustafson. “Through it all, he still managed to live well, receiving more than $20 million in personal benefits. I want to thank our partners at the FBI and SEC for unraveling this complex scheme, and acknowledge the efforts of the court-appointed receiver who has recovered more than $300 million that will be distributed to the victims.”
According to court documents and statements made in court, in 2005, Illarramendi founded and became a partner in Highview Point Partners (“HVP”) and began acting as an investment adviser to certain hedge funds. HVP was registered with the SEC as an investment advisor and eventually relocated from New York City to Stamford. In 2006, Illarramendi founded, and became a partner in, Michael Kenwood (“MK”), which was also located in Stamford, but was not registered with the SEC.
In late 2005, one hedge fund he advised lost approximately $5 million of the money he was charged with investing. Rather than disclose to his investors the truth about the losses incurred, Illarramendi concealed this information by engaging in a scheme to defraud and mislead his investors and creditors. As a result of the scheme, the hedge funds and related entities managed and advised by Illarramendi had outstanding liabilities that greatly exceed the true value of their assets, causing the funds’ investors, creditors and service providers to lose more than $700 million.
In order to keep his fraud hidden, and to secure an investment of approximately $100 million, Illarramendi paid $3.4 million in bribes to two officials of the Venezuelan state-owned oil company, Petroleos de Venezuela, S.A. (“PDVSA”). Illarramendi also paid a Venezuelan accountant, Juan Carlos Guillen Zerpa, and a purported Florida businessman, Juan Carlos Horna Napolitano, $1.25 million to assist him in the creation of the fictitious asset verification letter that falsely represented that STLF had at least $275 million in credits as a result of outstanding loans.
Illarramendi personally obtained more than $20 million during the course of the scheme, and used approximately $5 million of the funds to construct a home in New Canaan.
On March 7, 2011, Illarramendi pleaded guilty to two counts of wire fraud, one count of securities fraud, one count of investment advisor fraud, and one count of conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the U.S. Securities and Exchange Commission (SEC).
Alex Akesson
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