The U.S. government must sell a Porsche it seized from Kenneth Marsh, a New York man indicted for securities fraud, and give him $5,000 from the proceeds to buy a used car, a judge ruled.
U.S. District Judge Jack B. Weinstein ordered the sale at a hearing today in federal court in Brooklyn, New York. Marsh objected to the July 7 seizure of his 2007 black two-door Porsche 911 Turbo. The judge said that, while Marsh needs a car, it isn’t proper for him to be driving such an expensive one.
“Arrange for the sale of the Porsche and arrange for him to get a second-hand car,” Weinstein said.
Marsh, 43, of Staten Island, and four employees of his Gryphon Holdings Inc. were charged in April with conducting a $17.5 million fraud. Nine employees from the sales force were added to the case in June. Five defendants have pleaded guilty; the others, including Marsh, have pleaded not guilty.
“Judge Weinstein was very fair in trying to reach an equitable result, balancing Ken’s rights against his clients’ rights,” Fred A. Schwartz, one of Marsh’s lawyers, said in an interview.
The government took the car because it believes it was bought with proceeds from Marsh’s fraud, prosecutors said in court papers. On Feb. 25, Marsh transferred $88,749 from a Gryphon account to the car dealer, they said. Other than the money for the used car, the government will hold the proceeds of the Porsche sale.
Deprived of Car
Marsh was being deprived of use of the car, which he needs to seek employment and visit his 2-year-old son, even though he hasn’t been convicted, Schwartz said in court papers. Schwartz, of Adorno & Yoss LLP in Boca Raton, Florida, had asked that the Porsche be returned outright.
The U.S. Securities and Exchange Commission also sued the firm, Marsh and his associates, accusing them of misleading investors into paying fees for phony stock tips and investment advice.
Gryphon charged clients as little as $99 and as much as $250,000 for access to its investment recommendations, according to the SEC complaint. The company received $9.6 million last year and $3 million in the first two months of this year from investors, according to the complaint. Clients often lost money on trades suggested by Gryphon, the SEC said.
Gryphon’s employees lied about their credentials, falsely claiming to oversee billion-dollar hedge funds from offices on Wall Street and in London and Sydney, prosecutors said. The shop was run from a Staten Island strip mall, they said.
Schwartz said in the interview today that Marsh wasn’t an investment adviser. His client published a newsletter recommending stocks, which is protected by the U.S. Constitution’s First Amendment speech rights, he said.
The criminal case is U.S. v. Marsh, 10-cr-480, and the SEC case is Securities and Exchange Commission v. Gryphon Holdings Inc., 10-cv-01742, U.S. District Court, Eastern District of New York (Brooklyn).