Joseph Forte, Mini-Madoff: Philly Man Charged With $50M Ponzi Scheme

PHILADELPHIA — An investment manager ran a Ponzi scheme that swindled an estimated $50 million from as many as 80 investors, federal authorities charged.

Joseph S. Forte, 53, of Broomall, Pa., was given the money to invest between 1995 and 2008, the Securities and Exchange Commission said Thursday. Through his firm, Joseph Forte LP, he either lost it playing the market or didn't invest it at all, authorities said.

Meanwhile, Forte was telling his investors that he was making huge profits, investigators said. His portfolio in September reported a value of more than $150 million but its trading account contained less than $147,000, according to an SEC complaint filed Wednesday.

The commission said Forte admitted using as much as $20 million in investor funds to repay other investors and withdrawing up to $12 million in so-called fees for his own use. Investigators said account statements provided to Forte LP investors show he actually pocketed $28 million.

Forte, who is charged with fraud and related counts, did not return messages left by The Associated Press.

The investors thought their money was going into a commodity futures pool that traded in securities futures contracts, including S&P 500 stock index futures. The SEC said Forte admitted falsifying investment returns from the beginning.

Many of the alleged victims of the scheme were Forte's friends and acquaintances, said Daniel M. Hawke, director of the SEC's Philadelphia Regional Office.

"Using other people's money, Forte promised and reported outrageous returns over more than a 10-year period," Hawke said, "and because of his relationships with investors was able to lull them into trusting him with their funds."

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U.S. District Judge Paul S. Diamond issued an emergency order freezing Forte's assets and requiring him to turn over pertinent financial documents.

The SEC said its investigation was continuing.

The Commodity Futures Trading Commission, named the plaintiff in a related civil complaint, said Forte did not deposit any money into the trading account from October 2002 to February 2007.

"Ponzi schemers succeed by creating an illusion of profitability through lies and deceit," said Stephen J. Obie, acting enforcement director of the federal oversight agency. "We are committed to rooting out miscreants who, like Forte, destroy the lives of innocent victims and, ultimately, undermine the confidence of investors everywhere."

The commission wants Forte to pay fines and full restitution and seeks to have him permanently banned from commodities trading.

The news is just the latest investor fraud to come to light since Bernard Madoff's alleged $50 billion Ponzi scheme unraveled last month. Prosecutors said Thursday that investigators found 100 signed checks worth $173 million in Madoff's office desk that he was ready to send out to his closest family and friends at the time of his December arrest.

Thousands of individuals _ including ordinary people and Hollywood celebrities _ as well as big hedge funds, international banks and charities around the globe lost money investing with Madoff.

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On the Net:

SEC complaint: http://www.sec.gov/litigation/complaints/2009/comp20847.pdf

Commodity Futures Trading Commission complaint: http://tinyurl.com/a3zy6a

Comments

[strangerinthenight]

This is the Italian Mob Connection of Madoff. Only this time, white collar crime.

[bigmacha]

Old proverb:

"If something seems to good to be true, it probably is."

Self defense in investing (or poker):

Remember - when you sit down at the poker table, and you look to your left and then you look to your right and you can't find or figure out who is the patsy - then it's YOU.

Murphy's Law - "if something can go wrong it will, usually at the worst possible time"

O'Brien's Law - "Murphy WAS an optimist"

Bottom line, read this book first published in 1940:

"Where are the customers' yachts - a good hard look at Wall Street"

You shouldn't be surprised.

[philopatris]

A lot of the prosecution and lawsuits is waiting for Jan. 20. Don't forget the Republicans have systematically tried to cripple the corporate bar whenever it takes an adversary role to corporate misdoing and fraud. They never fail to claim that our businessmen need less regulation and less legal challenge, and they always characterize suits against corporations and finance entities as being like the little old lady who sued McDonald's for giving her coffee that was too hot for her little old tongue.

That is now going to change big time. A Democratic administration is feast after famine for corporate lawyers in and out of government, for criminal prosecutions and civil lawsuits against corporate malfeasance. All Obama has to do is sit there and smile.

[normalkid0615]

Note to self (if i ever get rich)- DON"T TRUST INVESTORS!!!

[ndem]

this is hilarious...you have to laugh so you won't cry!

[SkuddGobang]

Just the tip of the iceberg.

America has no idea that it's a 3rd world nation.

[ExRepublican]

There are a zillion mini Madoff's plundering god's green earth. They prey on the naive masses. And do (will continue to do) a bang up job. Most will not be punished.

[ErnestineBass]

Will Paulson and Bernanke ever be prosecuted for their $700 BILLION Ponzi scheme?

[ExRepublican]

heh. Great point. Agree, but only 700 Billion? They are in it more than that.

[breakingpoint]

ask yourself how many of these guys are out there?
do we have to institute Chinese justice in the US for these guys?

take your country back now!

[23000Days]

To quote Larry Beinhart from his article on raising taxes on the rich:
"Rich people can't be trusted with too much money. If they have too much easy cash around, they get conned into Ponzi schemes, they go for quick money deals, they get suckered into bubbles, and then the whole economy crashes."

[michmudder]

Hmmm...This doesn't fit the M pattern: Madoff, Merkin, Merckle, Magon de la Villehuchet, Maxwell, Merdle, and Melmotte.
Bernard Madoff, former chairman of the NASDAQ stock exchange, allegedly ran a $50 billion Ponzi scheme out of his Wall Street firm Bernard L. Madoff Investment Securities LLC.
Ezra Merkin, a money manager and chairman of GMAC, played a key role in introducing Madoff to some of his victims.
Adolf Merckle, businessman and one of the richest people in Germany, committed suicide on January 5 by throwing himself in front of a train. Not connected to Madoff.
Rene-Thierry Magon de la Villehuchet, French fund manager who invested with Bernard Madoff, who commits suicide.
Robert Maxwell, a British proprietor of a publishing empire, which collapsed in 1991 after his possible suicide or murder following fraud allegations.
Mr. Merdle, fraudulent banker, "the man of the age", in Dickens's Little Dorrit, who commits suicide.
Augustus Melmotte, a foreign-born fraudulent financier in Trollope's "The Way We Live Now", who commits suicide.

[23000Days]

Ya forgot Milkin....

[rocketman69]

And Marmaduke

[themodernleader]

Joe Forte, Madoff and thousands of other financial types have a common theme: "If it makes me money, its legal."

[schatsie]

yep, it is all about me and my shareholders expect me to make it about them also... tough luck..

[KBR]

A similar ponzi scheme was operated here in Philly by a guy named Bennett during the 1990s. Scores of non profits lost millions. I thought such a thing could not happen again here so soon. I guess lots of rich people are just as gullible as poor people when money is involved.

[berensma]

A person could probably start one up today and people would buy into it because they would assume no one would be dumb enough to do it right now.

[4TJefferson]

Say it alltogether... RICO, RICO, RICO, RICO! It is time to really put some fear into these bankers and use the R.I.C.O. (Racketeer Influenced and Corrupt Organizations Act).

[zitlight73]

But as Paulson and Brenneke demonstrated in October the bankers ARE the government, the president and congress are just their puppets. This was always the case but the men behind the curtain finally felt embolden to reveal themselves publically. As one of the Rothschilds said long ago,"Give me the control over a country's economics and I care not who makes her laws."

[schatsie]

yes, if Charles Keating could be convicted of that, why are these people not in jail already?

[DFL]

Also I heard from someone I know up in MN. of another ponzi scheme like this with a guy named Petters, and I picked up this name from the state fair in St. Paul MN. -DFL stands for democratic farmer labor.