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Post date: November 11 2014

A.G. Schneiderman Announces Guilty Plea And Prison Term For Bronx Fraudster In Multi-Million Dollar Ponzi Scheme

Owner Of The Van Zandt Agency Pleads Guilty To Securities Fraud, Grand Larceny And Scheme To Defraud; Robert H. Van Zandt Will Be Sentenced to 3 2/3 To 11 Years In Prison

Schneiderman: Hardworking People Put Their Trust In Van Zandt Only To Have Their Life Savings Stolen

NEW YORK - Attorney General Eric T. Schneiderman today announced the conviction of Robert H. "Bob" Van Zandt, a Bronx-based tax preparer who pleaded guilty to operating a $4.8 million, multi-year Ponzi scheme. Van Zandt pleaded guilty to the 33-count indictment lodged against him, including two counts of Securities Fraud under the Martin Act (a Class E felony), 29 counts of Grand Larceny in the Second and Third Degrees (Class C and D felonies, respectively) and two counts of Scheme to Defraud in the First Degree (a Class E felony). Van Zandt pleaded guilty in Bronx County Supreme Court before the Honorable Justice Martin Marcus. In exchange for his plea, entered late yesterday afternoon, to the indictment, Justice Marcus agreed to sentence Van Zandt to 3 2/3 to 11 years in prison. 

Securities fraud is a serious crime which my office will prosecute to the fullest extent of the law," Attorney General Schneiderman said. “Mr. Van Zandt stole his victims’ life savings, forcing some of them to re-enter the workplace after their retirement and others to rely on government assistance to survive. The perpetrators of this and other Ponzi schemes will face justice.”

According to the indictment and statements made by prosecutors, Van Zandt ran the Van Zandt Agency, a well-known tax-preparation business in the Bronx, for decades. Starting in 2007, Van Zandt began accepting investments from tax preparation clients. In many cases, these investors handed over their entire life savings to Van Zandt. Van Zandt solicited money from unsuspecting clients, promising guaranteed rates of returns. Starting in approximately 2008, Van Zandt’s alleged investment opportunities turned into a purely Ponzi-style scheme. Van Zandt guaranteed high rates of return to new investors, promising to invest their money in lucrative securities, including real estate projects that were, in fact, impossible to build. This money was not invested as promised, but rather was used to pay previous investors or diverted for personal expenditures. This scheme fraudulently raised more than $4.8 million between 2008 and 2012 from the 29 investors named in the indictment.

Van Zandt abused his position as a manager of a tax preparations business to identify and lure new investors, targeting victims who had large amounts of money available, such as retirement funds, savings, inheritances or settlements. Van Zandt made materially false representations and failed to disclose material facts to his investors in order to induce them to make investments, which ranged from $25,000 to nearly $900,000.

The funds were deposited into accounts affiliated with the Van Zandt Agency or controlled by Van Zandt and then commingled and transferred between accounts as needed to pay investors, business expenses, and for Van Zandt’s personal use. Contrary to the promissory notes or shareholder agreements that Van Zandt gave to his victims, the funds were never legitimately invested. In particularly egregious cases, although Van Zandt promised that investment funds would be used to purchase government bonds or corporate securities, no such bonds or securities were ever purchased for the victims.

Van Zandt is set to be sentenced on January 5.   

The case stems from an investigation initiated by the Attorney General’s Investor Protection Bureau in 2010. A civil lawsuit, filed by the Investor Protection Bureau in 2012 against Van Zandt and other individual and corporate defendants, is still pending. The Attorney General's civil lawsuit seeks $35 million in restitution for over 250 investors defrauded in the scheme, including the 29 investors named in the criminal indictment. 

The case was a result of a joint investigation by the Attorney General's Office and the New York State Department of Financial Services (DFS).  DFS Investigator Robert Tarwacki of the Criminal Investigations Bureau provided invaluable assistance to the investigation. The director of the Criminal Investigations Bureau is Ricardo Velez.  Benjamin M. Lawsky is the superintendent of The New York State Department of Financial Services. The Attorney General thanked Superintendent Lawsky and his staff for their assistance in this investigation.

The Attorney General’s investigation was handled by Investigator Edward Ortiz, Supervising Investigator Luis Carter and Deputy Chief Investigator Vito Spano. The Investigations Bureau is led by Chief Dominick Zarrella.

This criminal case is being prosecuted by Assistant Attorneys General Joseph G. D'Arrigo and Lee Bergstein, of the Attorney General’s Criminal Enforcement and Financial Crimes Bureau, with the assistance of Legal Analysts Natasha Butalia and Bradley Rutty and Supervising Analyst Paul Strocko. The bureau is led by Bureau Chief Gary T. Fishman and Deputy Bureau Chiefs Stephanie Swenton and Meryl Lutsky. The Division of Criminal Justice is led by Executive Deputy Attorney General Kelly Donovan.

The civil case is being handled by Assistant Attorney General R. Verle Johnson.  The Investor Protection Bureau is led by Bureau Chief Chad Johnson and Deputy Bureau Chief Katherine Milgram. The Division of Economic Justice is led by Executive Deputy Attorney General Karla G. Sanchez.

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