“The U.S. Attorney’s Office, FBI and our Connecticut Securities, Commodities and Investor Fraud Task Force are committed to the aggressive investigation and prosecution of individuals who attempt to obstruct the SEC and its critically important mission of protecting investors and the integrity of American capital markets,” said U.S. Attorney Fein.
According to court documents and statements made in court, Francisco Illarramendi of New Canaan, Conn. acted as an investment adviser to certain hedge funds. In approximately 2005 and 2006, one hedge fund he advised lost millions of dollars of the money he was charged with investing. Rather than disclose to his investors the truth about the losses incurred, Illarramendi intentionally chose to conceal this information by engaging in a long-running scheme to defraud and mislead his investors, creditors and the SEC to prevent the truth about the losses from being discovered. As part of the scheme, Illarramendi and others created fraudulent documents, including a fictitious asset verification letter falsely representing that one of the hedge funds, the Short Term Liquidity Fund (STLF), had at least $275 million in credits as a result of outstanding loans, when Illarramendi and others knew it did not have any such credits.
Illarramendi asked Horna to help him document the existence of loans on the books of the STLF in order to mislead the SEC. Horna, in turn, recruited Juan Carlos Guillen Zerpa, the managing partner of a Venezuelan accounting firm, to sign a letter on his accounting firm’s letterhead regarding the list of loans that Illarramendi could use to improve the appearance of the assets of the STLF fund. Illarramendi represented to Horna that Illarramendi would pay him approximately $3.8 million for the creation of the fictitious asset verification letter.
In late 2010, Guillen, who expected to receive approximately $1 million for his participation, agreed to prepare the asset verification letter that would falsely indicate that the STLF had made outstanding loans to Venezuelan companies. Horna then worked with other persons to create a fraudulent list of loans and to incorporate this list in the asset verification letter to be signed by Guillen.
In approximately January 2011, Guillen executed the false asset verification letter and sent it by e-mail to Illarramendi. Thereafter, Horna and Guillen learned that the false asset verification letter had been supplied to the SEC, and that the SEC had initiated a civil action against Illarramendi and others (SEC v. Illarramendi, et al., 3:11-CV-00078). In an effort to deceive and mislead the SEC and to prevent the SEC from learning during the civil action that the asset verification letter was false, Horna, Guillen, Illarramendi and others sought to create fraudulent documentation to falsely support the information contained in the letter. Guillen also participated in a telephone call with representatives of the SEC in January 2011 in which he intentionally misrepresented that the assertions in the asset verification letter about the existence of the hedge funds’ assets were true, when he knew they were false.
Horna maintained control of a Florida bank account in the name of Jeislo Real Estate Investments LLC. In furtherance of the conspiracy, Illarramendi caused two transfers of funds in the total amount of $1.25 million to be made into this bank account. As partial payment for Guillen’s services in this conspiracy, Horna caused $250,000 to be transferred to a third party for the benefit of Guillen.
Today, Judge Underhill ordered Horna to forfeit $935,000, which represents the $1.25 million transferred into the account, minus $315,000 that Guillen has previously forfeited. Horna also was ordered to pay a fine in the amount of $10,000, which will be waived if he pays the full forfeiture amount.
Horna and Guillen were arrested by FBI special agents on March 3, 2011, in Florida. On May 19, 2011, Horna pleaded guilty to one count of conspiracy to obstruct an official proceeding of the SEC.
On Dec. 14, 2011, Guillen, who pleaded guilty to the same charge on May 4, 2011, was sentenced to 14 months in prison.
On March 7, 2011, Illarramendi pleaded guilty to two counts of wire fraud, one count of securities fraud, one count of investment advisor fraud and one count of conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the SEC.
Illarramendi awaits sentencing.
This matter is being investigated by the FBI and is being prosecuted by Senior Litigation Counsel Richard J. Schechter and Assistant U.S. Attorney Paul A. Murphy.
U.S. Attorney Fein also acknowledged the substantial assistance provided by the U.S. Attorney’s Office for the Southern District of Florida.
In December 2010, the U.S. Attorney’s Office and several law enforcement and regulatory partners announced the formation of the Connecticut Securities, Commodities and Investor Fraud Task Force, which is investigating matters relating to insider trading, market manipulation, Ponzi schemes, investor fraud, financial statement fraud, violations of the Foreign Corrupt Practices Act and embezzlement. The task force includes representatives from the U.S. Attorney’s Office; FBI; Internal Revenue Service—Criminal Investigation; U.S. Secret Service; U.S. Postal Inspection Service; U.S. Department of Justice’s Criminal Division, Fraud Section and Antitrust Division; SEC; U.S. Commodity Futures Trading Commission (CFTC); Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Office of the Chief State’s Attorney; State of Connecticut Department of Banking; Greenwich Police Department and Stamford Police Department.
Citizens are encouraged to report any financial fraud schemes by calling, toll free, 855-236-9740, or by sending an e-mail to ctsecuritiesfraud@ic.fbi.gov.
This case was brought in coordination with the President’s Financial Fraud Enforcement Task Force, which was established to wage an aggressive and coordinated effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
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