Huffpost Chicago

Frank Castaldi Gets 23 Years For $77M Ponzi Scheme

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CHICAGO — Tearful, angry victims of a $77 million Ponzi scheme that targeted hundreds of often working-class Italian-Americans crowded into a Chicago courtroom Thursday to tell their stories before a judge handed the convicted swindler a maximum 23-year prison term.

The federal judge rejected prosecutors' recommendation of a 12 1/2 year sentence for Frank Castaldi – in part because he had reported the two-decade scam himself – saying that would let the 57-year-old accountant and businessman off too easy, given the lives he ruined.

Castaldi, once a respected member of the Chicago-area Italian community himself, sometimes targeted the elderly, widows and immigrants from Italy – many of whom were close friends of Castaldi who trusted him, U.S. District Judge John Darrah said.

"This is an offense of a huge magnitude," Darrah told the court. "Frank Castaldi abused that trust and had a horrific impact on victims," he said.

The slight, mustachioed Castaldi, who will begin serving his sentence on Nov. 15, also gained the trust of some by helping do their income taxes for years, prosecutors said.

Dozens of victims packed into the courtroom to speak at the sentencing hearing. Others were forced to stand in the doorway, straining to listen to often gut-wrenching testimony.

Reading from letters, Darrah cited one woman who said Castaldi persuaded her to invest $300,000 shortly after her husband had died, assuring her he would help her out.

"Instead, like a vulture, he prayed on my weakness," Darrah said, reading from the letter.

Frank Cesare, 72, said he had come from Italy and saved money all his life so he could help his children and grandchildren. Now, he said, he has lost all his savings to Castaldi.

"What Frank Castaldi took from us was our American dream," he told the court. "Now, I will be a financial burden to my family until my death."

Another man cradled his newborn baby in his arms as he stood before the judge.

"Look at what Mr. Castaldi has done to us," said Matthew Duggan, who lost $65,000. "Who is going to send our daughter to college now?"

Castaldi looked on from a nearby defense table, sometimes turning his eyes down and appearing to dab tears. Several of his young children also sat in the courtroom, often sobbing uncontrollably, their faces in the hands.

Judy Milazzo told the court she felt bad that Castaldi's kids had to listen to the testimonials but that he had brought the pain to his family himself. She described how Castaldi knew most of his victims personally, befriending them over decades, attending their birthday parties and weddings.

"He is so deceitful and evil," she said. "He said all the right things and even kissed us each and every time he saw us. "It was the kiss of death."

Several spectators broke into applause when Milazzo asked Darrah to impose the maximum penalty – the judge admonishing them to remain silent or be escorted out.

Prosecutors had asked for a more lenient sentence because Castaldi had reported his own Ponzi scheme to authorities in 2008, apparently as he became more frantic about paying initial investors with cash from new ones.

Castaldi promised investors between 10 and 15 percent annual interest rates on promissory notes he sold them; he pleaded guilty last year to one count of mail fraud and one count of impeding the IRS in the collection of taxes, according to prosecutors.

Darrah didn't immediately address the issue of restitution, saying he would allow more time to calculate amounts owed to victims.

In all, Castaldi raised more than $77 million from some 473 investors – around $59 million of which was made in payments to early investors. When the scheme collapsed in 2008, Castaldi was left owing about $31.6 million to more than 300 individuals and investor groups.

Before the judge announced the sentence, Castaldi also addressed him briefly.

"I'm so sorry for the pain I created," he said.

But Milazzo, like others victims, said she felt shame at having been duped, that she has been broken emotionally – and she fears she'll never be able to trust anyone again.

"We can never forget or forgive," she said.