SEC sues over Marin Ponzi scheme, seeking $10 million
Braden Cartwright, 09 June 2021
Details of the largest financial crime in Marin’s history were revealed in a lawsuit filed last week by the Securities and Exchange Commission against the estate of Ken Casey, who operated a Ponzi-like scheme and stole more than $10 million until his death in May 2020. Mr. Casey’s two Novato-based companies, Professional Financial Investors and Professional Investors Security Fund, brought in hundreds of millions of dollars from more than 1,300 victims. Investors believed they were financing a part of 70 residential and commercial properties in the area; in reality, their money was being used to pay prior investors and line the pockets of Mr. Casey and his co-conspirator, Lewis Wallach. “Many of the investors were elderly, retired and relying on their investment income for daily living expenses,” attorney Bernard Smyth wrote. Several West Marin residents were snared in the scheme, and some were given a commission to bring in more investors.
“This is one of the favorite methods used to lure people into Ponzi schemes,” Sid Patel, a special agent with the Federal Bureau of Investigation, said in a press conference. The S.E.C. is asking a judge to order Mr. Casey’s estate to pay $10.3 million, plus interest. At the same time, the companies are in bankruptcy court and facing two class-action lawsuits to determine what will be done with the properties and how investors could recover their money. The companies do have real assets, but not enough to return investments in full. Mr. Casey pocketed more than $1.3 million in his personal safe, and he spent millions on labor and a major renovation at his home. He also used the money to pay his tax bill, his credit card bill and his family members’ rents. He falsified financial statements to create the impression that investments were safe, and he misrepresented where investors’ money was going, according to the lawsuit. At the start of the pandemic, investors were told that the companies had the resources to expand and remain profitable, when in fact the reserves had been depleted. Mr. Wallach, the former C.E.O. of Professional Financial Investors, pled guilty in December to fraud charges and agreed to pay restitution of $26.7 million. “We may not be able to make the victims whole, but we are determined to do everything we can under the federal legal process to right these wrongs,” Mr. Patel said. Forensic accountants found that the scheme goes back to at least 2007, when the companies began keeping digital records. Mr. Casey had a criminal background, pleading guilty in 1997 to preparing false tax returns. He was sentenced to 18 months in prison and lost his certification as a public accountant. Still, he maintained a good reputation locally as a businessman and philanthropist. He contributed to state and local elections, including to the campaigns of District Attorney Lori Frugoli and Supervisor Judy Arnold. He served on the county’s Human Right Commission, and he was remembered fondly by the Board of Supervisors and Novato City Council after he died.
