UPDATED, Oct. 15, 11:04 a.m.: When developer Robert Shapiro pleaded guilty in August to leading a $1.3 billion real estate Ponzi scheme, he faced up to 25 years in prison.
On Tuesday, a federal court judge sentenced Shapiro to that maximum, closing the criminal chapter on what has been a two-year-long saga surrounding the massive fraud perpetrated by Shapiro’s now-defunct Sherman Oaks-based investment firm, Woodbridge Group of Companies.
In all, more than 7,000 property investors were defrauded over five years until Woodbridge went under in late 2017 amid a wide-reaching federal investigation into the scheme, the government said in a release announcing the sentencing.
The majority of the prison sentence — 20 years — is for defrauding those investors, and for committing wire and mail fraud. The 61-year-old was sentenced to an additional five years for failing to pay $6 million in taxes owed between 2000 and 2005.
To raise money for the fraud, Woodbridge Group promised investors — many of them elderly — that the cash would go toward building and buying luxury properties that would yield high returns. Instead, Shapiro and the company bought those properties themselves through a web of legal entities to obscure ownership.
Woodbridge bought hundreds of millions of dollars worth of properties and development sites in Los Angeles and across the country. It paid out investors using cash from new investors in a classic Ponzi scheme arrangement. Shapiro himself siphoned off between $25 million and $95 million to fuel his glitzy lifestyle, prosecutors said. The case against him took place in Miami, as did the sentencing.
At least 2,600 Woodbridge investors put their retirement savings into the firm, totaling $400 million, according prosecutors. Shapiro personally spent at least $3.1 million of that money on travel and charter planes, $6.7 million on a home and another $2.6 million on renovations, $1.8 million paying off personal income taxes, and $672,000 on vehicles., the government said.
Shapiro and his wife agreed to forfeit a massive trove of luxury items they purchased with misappropriated funds, including artworks by Picasso and other artists, a 603-bottle wine collection, and several pieces of diamond jewelry.
While the criminal case against Shapiro is over, independent managers are in charge of selling off the rest of Woodbridge’s assets to recoup money for defrauded investors.
Shapiro is also on the hook to pay the Security and Exchange Commission $120 million as part of a civil settlement with the agency.
Federal law enforcement continues to pursue claims against other Woodbridge executives. Investors have sued for compensation from at least one bank, Comerica Bank, that held Woodbridge accounts.
The post Robert Shapiro gets 25 years in prison for massive Ponzi scheme appeared first on The Real Deal Los Angeles.
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