Accountant Gets 14 Months For Role in New Canaan Man's 'Massive' Ponzi Scheme

A Venezuelan accountant has been sentenced to 14 months in federal prison, followed by two years of supervised release, for obstructing an SEC investigation into a masterminded by a New Canaan hedge fund advisor that bilked hundreds of millions of dollars from foreign investors.

According to a statement from David B. Fein, United States Attorney for the District of Connecticut, Juan Carlos Guillen Zerpa, 44, a citizen of Venezuela, was sentenced Dec. 14 by United States District Judge Stefan R. Underhill in federal court in Bridgeport for his role in the “massive” fraud scheme. Guillen, who pleaded guilty in May, was also ordered to pay a $10,000 fine and forced to forfeit $315,000 to the government.

According to the statement, Guillen helped create falsified documents that assisted hedge fund advisor Francisco Illarramendi of New Canaan in deceiving SEC investigators and covering up the ponzi scheme, which authorities said was not too unlike the one that convicted financier Bernie Madoff devised.

, Illarramendi pleaded guilty in March to two counts of wire fraud, one count of securities fraud, one count of investment advisor fraud, and one count of conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the U.S. Securities and Exchange Commission. He awaits sentencing and faces up to 70 years in prison.

According to court documents and statements made in court, Illarramendi acted as an investment adviser to certain hedge funds. In about 2006, one hedge fund he advised lost millions of dollars, however, “rather than disclose to his investors the truth about the losses incurred, Illarramendi intentionally chose to conceal this information by engaging in a long-running scheme to defraud and mislead his investors, creditors and the SEC to prevent the truth about the losses from being discovered,” the release states.

“As part of the scheme, Illarramendi and others created fraudulent documents, including a fictitious asset verification letter falsely representing that one of the hedge funds, the Short Term Liquidity Fund (“STLF”), had at least $275 million in credits as a result of outstanding loans, when Illarramendi and others knew it did not have any such credits,” the release states, adding that it was Guillen who agreed in 2010 to prepare a asset verification letter that would falsely indicate that the STLF had made outstanding loans to Venezuelan companies.

Another co-conspirator in the case, Juan Carlos Horna Napolitano, “then worked with other persons to create a fraudulent list of loans and to incorporate this list in the asset verification letter to be signed by Guillen,” the release states.

Around January 2011, Guillen emailed the false asset verification letter to Illarramendi. Thereafter, Guillen and Horna learned that the letter had been supplied to the U.S. Securities and Exchange Commission, and that the SEC had initiated a civil action against Illarramendi and others.

“In an effort to deceive and mislead the SEC and to prevent the SEC from learning during the civil action that the asset verification letter was false, Guillen, Illarramendi, Horna and others sought to create fraudulent documentation to falsely support the information contained in the letter,” the release states, adding that Guillen had also told SEC officials in a conference call in January 2011 that the statements made in the verification letter were true, even though he knew they were false.

Federal authorities said Guillen was to be paid approximately $1 million for his willingness to sign the false asset verification letter.

“Horna maintained control of a Florida bank account in the name of Jeislo Real Estate Investments, LLC,” the release states. “In furtherance of the conspiracy, Illarramendi caused two transfers of funds in the total amount of $1.25 million to be made into this bank account. As partial payment for Guillen’s services in this conspiracy, Horna caused $250,000 to be transferred to a third party for the benefit of Guillen.”

In a letter to the Court, David E. Bergers, regional director of the SEC’s Boston Regional Office said Guillen’s conduct “delayed the Commission staff’s detection of a very serious financial fraud. It also resulted in the Commission staff expending additional government resources to uncover the fraud via other methods. We consider this kind of misconduct, especially by industry professionals such as [Guillen], to be particularly damaging to investors, to our capital markets and to the Commission’s investigative mission.”

Horna also awaits sentencing.