Robert Shapiro, the founder of the Woodbridge group of companies, will spend 25 years in prison after pleading guilty to charges that orchestrated a $1.3 billion real estate Ponzi scheme that bilked thousands of investors out of hundreds of millions of dollars.
Nearly two years ago, the Securities and Exchange Commission sued Shapiro for allegedly running a Ponzi scheme that defrauded more than 8,400 investors by promising high returns on real estate investments.
According to the SEC, many of Shapiro’s alleged victims were seniors who invested their retirement savings into the supposed Ponzi scheme.
Last year, the SEC ordered Shapiro and the Woodbridge companies to pay back $1 billion for operating the Ponzi scheme.
According to the SEC, Judge Marcia Cooke of the District Court for the Southern District of Florida approved judgments against Woodbridge and its 281 related companies that order the companies to pay $892 million in disgorgement.
Additionally, Cooke ordered Shapiro to pay a fine of $100 million, plus disgorgement of $18.5 million in ill-gotten gains and $2.1 million in prejudgment interest.
But Shapiro’s troubles didn’t end there.
Shapiro also faced criminal charges from the U.S. Attorney’s Office, and according to multiple reports, Shapiro was sentenced last week to 25 years in prison.
From the South Florida Sun Sentinel:
Shapiro, 62, learned of his fate after pleading guilty last month to mail and wire fraud and income tax evasion. U.S. District Judge Cecilia Altonaga, citing the heart-wrenching stories of a more than a half-dozen victims who testified in court about their losses Tuesday, rejected a defense argument that Shapiro deserved less time because he admitted his wrongdoing and helped authorities unravel his six-year-long fraud scheme.
According to authorities, Woodbridge’s main business model was to solicit money from investors in exchange for promissory notes that supposedly reflected 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,” the U.S. Attorney’s Office stated.
“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,” the U.S. Attorney’s Office continued.
But, many of the supposed properties didn’t actually exist. Beyond that, the few properties that actually existed 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,” the U.S. Attorney’s Office stated.
The company advertised high rates of return for its investments, but the SEC previously claimed that Shapiro’s companies received more than $1 billion in investor funds, but only generated approximately $13.7 million in interest income from “truly unaffiliated” third-party borrowers.
And without true income from the supposed investments, Shapiro allegedly used new investor money to pay the returns owed to earlier investors – the hallmark of a Ponzi scheme.
In total, Shapiro and his co-conspirators convinced more than approximately 9,000 investors to invest more than $1.29 billion with Woodbridge. According to court documents, at least 2,600 of these investor victims invested their retirement savings, totaling approximately $400 million.
And while the companies may not have been successful, Shapiro certainly lived like they were.
According to federal authorities, Shapiro misappropriated $36 million in investor money for himself and for the benefit of his immediate family members, spending millions on personal expenditures,
Included among those were $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.
Eventually, Shapiro’s alleged scheme collapsed when the companies were unable to repay interest payments to certain investors. Fundraising from investors then stopped, Shapiro resigned, and most of his companies filed for Chapter 11 bankruptcy.
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.