NJ ADVISER SENTENCED TO PRISON

by Christopher J. Gray on September 1, 2011

in Citigroup,Merrill Lynch,Securities Fraud

Carlo Chiaese, an investment adviser, has been sentenced to 58 months in prison and must pay restitution totaling $2.5 million for broker misconduct including failure to invest and falsified documentation. Rather than investing his client’s money, Chiaese used the money to pay for his extravagant lifestyle. Purchases included leases on a Land Rover, an Audi Q7 and a Porsche 911 Carrera totaling $40,000; country club fees; $16,000 in rugs; $25,000 in shopping trips to high-end department stores; and $800,000 which was transferred directly to his wife and in-laws.

NJ adviser sentenced to prison

Chiaese’s broker fraud began in 2008 and lasted roughly two years. To earn the trust of new clients, he flaunted the investment experience he earned at Merrill Lynch, Citibank and other firms. After earning his clients’ trust, he raised $2.4 million by promising to invest conservatively and traditionally. Not only did he fail to invest conservatively and traditionally, he did not invest the money at all. The majority of the money, $1.7 million, came from a union pension fund belonging to Local 333, United Marine Division, International Longshoreman’s Association. The bilked fund contained the pensions of 850 individuals. Of the total $2.4 million stolen, Chiaese spent $1.4 million on personal expenses. In addition, he used $280,000 to repay other investors.

Chiaese, 38, pleaded guilty to securities fraud and could have faced 20 years in prison and $5 million in fines. In addition to the final sentence, 58 months in prison and $2.5 million in restitution, Chiaese will submit to three years of supervised release once his prison sentence is served. Chiaese was sentenced by U.S. District Judge William Martini and was released on a $750,000 bond. However, provisions of his bail required that Chiaese must avoid working in finance and participate in a drug treatment program.

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