Ponzi Scheme Accountant Pleads Guilty in Connecticut

(May 8, 2011) – Another conspirator in an international Ponzi scheme that preyed upon a Venezuelan pension plan has pleaded guilty in a Connecticut courtroom.

According to Dow Jones, Juan Carlos Guillen Zerpa – the accountant for investor Francisco Illarramendi, who in March admitted to running a pyramid scheme – pleaded guilty to one count of conspiracy of obstructing the Securities and Exchange Commission (SEC) in an investigation of Michael Kenwood Group, an unregistered investment advisor based in Stamford, Connecticut. Guillen Zerpa, according to Dow Jones, has admitted to writing a letter to the SEC in which he falsely claimed that $275 million in assets existed, when, in fact, they had been misappropriated by Illarramendi. 

The fund – which was seeded by Petroleos de Venezuela (PDVSA), Venezuela’s national oil company, in the tune of $500 million – was raided of tens of millions of dollars by Illarramendi. The PDVSA has a total of $2.5 billion in assets, meaning that upward of 20% of its assets were with this one fund.

“Guillen agreed in December to prepare an asset verification letter that would falsely indicate one of Illarramendi’s funds had made outstanding loans to Venezuelan companies,” according to Dow Jones. “For this effort, he expected to be paid $1 million.”

According to the original lawsuit against the fund, Illarramendi, of New Canaan, was accused of numerous fraud counts and other charges in what prosecutors called a massive Ponzi scheme, potentially costing investors hundreds of millions of dollars. While a sentencing date has not been determined, Illarramendi faces up to 70 years in prison, compared to the 72-year-old Bernie Madoff’s 150-year prison sentence.

“Illarramendi treated his clients’ money like it was his own, diverting millions of dollars that did not belong to him,” said David P. Bergers, Director of the SEC’s Boston Regional Office, in a January statement. “He abused his position of trust with his clients and breached his responsibilities as an investment adviser.

The criminal case is U.S. v. Illarramendi, U.S. District Court, District of Connecticut. The SEC case is SEC v. Illarramendi.