Capitol Investments' Ex-Owner Pleads Guilty to $880 Million Ponzi Scheme
Nevin Shapiro, the former owner of Capitol Investments USA Inc. and a booster of college athletics, pleaded guilty to running an $880 million Ponzi scheme.
Shapiro, 41, of Miami Beach, Florida, admitted today in Newark, New Jersey, federal court that he defrauded more than 50 investors who lost between $50 million and $100 million in his bogus wholesale-grocery distribution business. He said he used new investors’ money to pay earlier ones, as well as to fund a lavish lifestyle.
Shapiro admitted to stealing $35 million to pay illegal gambling debts, make mortgage payments on a $5 million house, and buy floor seats to Miami Heat basketball games. Shapiro, who gave $150,000 to the University of Miami for an athletic lounge, said he gave cash or gifts to dozens of student-athletes.
“Nevin Shapiro made a name for himself as a big contributor to student athletics -- showering his favorite players with gifts and cash, living the high life, and rubbing elbows with the pros,” U.S. Attorney Paul Fishman said in a statement. “Shapiro admitted that he built the façade of his lifestyle with money he stole from those who trusted him.”
Shapiro’s lawyer, Maria Elena Perez, didn’t immediately return a call. A message left with the University of Miami’s media relations office wasn’t immediately returned.
Shapiro pleaded guilty to one count of securities fraud and one count of money laundering. He faces as long as 30 years in prison on both counts. U.S. District Judge Susan Wigenton set sentencing for Jan. 4.
Shapiro, who has been in jail since his April arrest, promised investors from January 2005 to November 2009 that their money would fund his grocery business, according to an indictment.
He promised returns of 10 percent to 26 percent in a company that he said had tens of millions of dollars in annual sales, when in truth “Capitol had virtually no active wholesale grocery business,” according to court papers.
In a related civil case, the Securities and Exchange Commission estimated Shapiro raised about $900 million and said he used $769 million of incoming funds to pay returns to earlier investors. The regulator wants him to forfeit ill-gotten gains and pay unspecified fines.
He also paid $13 million in undisclosed commissions and fees to individuals who attracted other investors, according to the SEC.
Investors forced Capitol into involuntary bankruptcy, the Federal Bureau of Investigation has said. The company, based in Miami Beach, was a so-called grocery diverter, which buys low- priced food in one region and sells it for a profit elsewhere, the SEC said.
The criminal case is U.S. v. Shapiro, 10-cr-00471, U.S. District Court, District of New Jersey (Newark). The SEC case is Securities and Exchange Commission v. Shapiro, 10-cv-21281, U.S. District Court, Southern District of Florida (Miami).