Large Scale Fraud in Pennsylvania

Multi-Million Dollar Pyramid Scheme & Mail Fraud Charged

Jan 27, 2009

Pennsylvania man charged in pyramid investment scheme that lost tens of millions of dollars for investors according to FBI.

The Federal Bureau of Investigation (FBI) has made a statement in a Philadelphia press release that a Delaware County Man has been charged in a large scale investment fraud. Acting United States Attorney Laurie Magid announced filing a criminal complaint against Joseph Forte, stating that Forte was being charged with mail fraud in a pyramid scheme.

Forte Charged in Pyramid Scheme

Forte was the sole general partner of an investment fund which he allegedly used to defraud investors of tens of millions of dollars between 1996 and 2008 through a pyramid, or Ponzi scheme.

Forte, 53, has admitted to raising at least $50 million in investment capital from about 80 investors, according to the affidavit, as stated in the FBI press release. Included in the 80 investors were a charity, a church and a private school.

Forte claimed to investors that he was trading profitably in S&P 500 stock index futures contracts. Quarterly investment reports to investors claimed that the trades were profitable, with claimed of returns ranging from 18% to 38%.

While Forte as claiming the trades were profitable, in fact he was losing money. His reported earnings were falsified, according to the affidavit. The aggregate trading losses amounted to $3.3 million.

According to the affidavit, only about half of the money that investors deposited as even put into the trading account. Forte gave himself compensation of millions of dollars in salaries and fees. He used over $15 million of investor funds to pay off investors who made redemption requests.

Forte allegedly used falsified claimes of high returns to attract new investors.

Ponzi Schemes Exploit Trust

Magid stated, according to the FBI press release, that "Ponzi schemes such as this exploit the trust and hopes of investors, including friends and charitable institutions. In these troubled economic times the devastation caused to the victims cannot be overstated. Our office will continue to aggressively prosecute those who use the financial markets to deceive and defraud the public."

According to the affidavit, Forte mailed quarterly investment reports to mislead investors about the trade performance. According to the most recent statement, Forte reported to investors that his fund had a value of $154,700,189. In reality the fund was worth less than a tenth of that figure, less than $150,000.

Because Forte used the U.S. Postal Service to send out the falsified reports the U.S. Postal Service participated in the investigation, along with the FBI, in cooperation with the Commodities Futures Trading Commission, Securities and Exchange Commission and the Delaware County District Attorney's Office.

"The FBI views these types of financial investment frauds as significant problems, because of the devastating effect they have not only on the individual victims who are preyed upon but also the effect they have on the overall economy," said Janice K. Fedarcyk, Special Agent-in-Charge of the Philadelphia Division of the FBI.

If convicted, Forte faces a maximum possible sentence of 20 years imprisonment and a $250,000 fine. The U.S. Attorney's Office will seek full restitution for his victims, including forfeiture of any proceeds traceable to the commission of the offenses.

¹An complaint is an accusation. A defendant is presumed innocent unless and until proven guilty.

The copyright of the article Large Scale Fraud in Pennsylvania in Crime is owned by Christine Nyholm. Permission to republish Large Scale Fraud in Pennsylvania in print or online must be granted by the author in writing.