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Short Hills investment firm charged with Ponzi scheme advertisement
Wednesday, December 29, 2010
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The New Jersey Office of the Attorney General and the Bureau of Securities have filed a lawsuit against Carr Miller Capital LLC and its three principals. The firm's principal place of business is listed on JFK Parkway in Short Hills and has operations out of South Jersey. The allegation is use of a Ponzi scheme and other means to defraud investors of over $40 million. Everett Charles Ford Miller, 41, President of Carr Miller Capital, and Ryan Jude Carr, 34, and Brian Patrick Carr, 39, cousins and employees of Carr Miller Capital, are named as defendants in the state's nine-count Complaint. The lawsuit filed in State Superior Court in Newark alleges that the defendants violated numerous state Uniform Securities Laws by committing fraud, commingling f d d lli i d ii Advertisement
The lawsuit alleges that in December 2009 Carr Miller Capital LLC changed its named to Capital Markets Advisory, LLC. The Bureau and state alleged that Carr Miller Capital LLC continued to operate as a separate company after the name change. According to the lawsuit, in or about 2007, Carr Miller Capital LLC and/or Capital Markets Advisory LLC through the defendants sold and continued to sell securities in the form of promissory notes. The document states that the Carr Miller notes had a term of nine months and promised returns of between 10 percent and 15 percent per year and return of the principal investment at the end of the ninemonth period. It also states that the Carr Miller Notes were not registered with the Bureau, nor were they exempt from registration. According to the lawsuit, between 2007 -2009 Carr Miller Capital LLC and related companies received $40 million in deposits. About $36 million of those deposits was
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dollars was from the firm's own employees. The investigation revealed that $16 million of the total was transferred into businesses purportedly operated by related companies including hedge funds, real estate, film production companies and an oil and gas venture. Erza Zask with SFC Associates is a senior expert on hedge funds, securities, and Ponzi schemes with 20 years experience as a consultant. He would categorize this $40 million Ponzi scheme allegation as a medium scale operation. Zask underscores that good Ponzi scheme operators prey on an investor's psychology and advises investors keep a healthy skepticism especially when dealing with investments outside of the mainstream. "Ponzi schemes use a number of devices like not overpromising returns, keeping low profiles almost to maintain an air of exclusivity," said Zask. "They are experts at gaining people's trust." According to the Attorney General Paula Dow's press release, about $13.5 million of investors' monies were used to pay for a New Jersey Devils sky box at the Prudential Center in Newark, personal automobile purchases,
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"Instead of investing funds to produce high rates of return as promised, we allege that the defendants spent investors' hard-earned money on personal luxuries and indulgences," said Dow in the release. The lawsuit states that approximately $8 million of the $40 million was paid to certain investors, at times, and characterized as interest payments. Zask offers a number of red flags that investor's should keep in mind in regards to Ponzi schemes. One is what he calls the too good to be true scenario. He adds that when investors see extraordinary returns without a lot of risk, they should be suspicious. He reminds investors that within Ponzi schemes, new money is essential to keeping the operation alive as it is what operators use to pay dividends or interest payments to old investors. On the other hand, many Ponzi scheme operators make themselves look like middle of the road investment firms to keep under
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offer spectacular returns but rather offer steady returns. He says many take in money through referrals rather than advertisement or marketing, which helps them to uphold an air of secrecy. advertisement
Zask says it is of utmost importance that individuals take the time to understand what the actual investment program is. "Google Finance and Yahoo Finance are good source for these things," said Zask. "Securities that are registered are easy to identify because it is public record."
New Jersey at 973-504-3600. The Bureau's website is www.njsecurities.gov. E-mail: donofrio@northjersey.com or call 973-921-6455
He does say that registration of securities is a potential red flag, but many vehicles are not required to be registered. As a bottom line Zask says that if a security is not registered there should be good reason for it. According to Zask Securities and Exchange Commission (SEC) also has a wealth of information regarding investment advisors. "You can look up people through the SEC and make sure they are registered or see if there are any outstanding actions against them," added Zask. The Bureau of Securities can be contacted toll-free within New Jersey at 1-866-IAdvertisement
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