Spitzer Charges Pair In $3.8 Million Promissory Note Fraud
Attorney General Spitzer today announced that he has charged two Kingston men in a promissory note fraud scam that cost their victims $3.8 million.
The men were insurance agents who used their relationship with clients to sell them nine month notes in several start up companies by claiming a "risk-free, guaranteed return of 10.5%" on their money.
The victims often cashed out their life insurance policies, retirement savings or childrens' college education funds to invest in the high risk notes. All of the companies went bankrupt and the investors lost all of their money.
Frank Fucilo, 68 of 286 Albany Avenue in Kingston, and Tiber Tomshaw, 52 of 187 Henry Street in Kingston, are charged with fraud, making unsuitable investment recommendations, and failure to register as a securities broker.
"These two men are the worst kind of scam artists- they preyed on people who had placed their trust in them through their insurance dealings," said Spitzer. "In return, their clients, some of them elderly, have been swindled out of their life savings, retirement funds, and money set aside for their children and grand childrens' educations."
Fucilo is accused of obtaining $3.4 million from 57 victims, for which he received $300,000 in commissions. Tomshaw is accused of obtaining $430,000 from 12 victims, for which he received $66,000 in commissions.
The two men knew each other, but did not work together on the scam. The sales took place between April of 1998 and January of this year.
Many of the victims live in the Kingston area. On average, they lost between $50,000-$75,000 each.
One of the victims, Angie Simpson of Kingston lost $350,000. Another victim, James McNerlin of Kingston, lost $100,000 investing through Fucilo. "Fucilo told me that I could not lose by investing through him," he said. "I feel like someone's come and robbed me in my own home."
A third victim, Carol Silk, also of Kingston lost $50,000. All three appeared at the news conference with Spitzer.
The victims invested in the following six companies: Redbank Petroleum, Inc., Caffe Diva, World Vision Entertainment, Inc., Technical Support Services, Inc., Pacific Air Transport, Inc., and Corlogic Corporation.
Spitzer filed papers in Manhattan State Supreme Court this morning, seeking an order to prevent the men from continuing to issue, sell, or market securities. He will seek to permanently bar the pair from the securities industry, as well as restitution and damages.
"This case should serve as a warning to every consumer in New York," said Spitzer. "There is no such thing as a 'guaranteed, risk-free' investment and anyone who tries to sell you one is only looking to steal your money. Consumers should use the utmost caution when making investments, and check to ensure that both the security and the person selling it are registered in New York."
New York's case is part of a nationwide action by 38 states to fight the growing problem of promissory note fraud.
The case was handled by Assistant Attorney General Elizabeth Block under the supervision of the head of the Investor Protection and Securities Bureau, Eric Dinallo.