SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16160 / May 25, 1999
SECURITIES AND EXCHANGE COMMISSION v. RICHARD GOETTLICH, ET AL., 97 Civ. 1144(MTB)(D.N.J.)
RICHARD GOETTLICH ORDERED TO PAY $271
MILLION IN EQUIPMENT LEASE PONZI SCHEME
New York -- The Commission announced today that a federal judge in Newark, New Jersey issued a judgment that permanently enjoins Richard Goettlich and orders him to pay $271 million in disgorgement, interest and penalties for defrauding hundreds of investors in a massive "Ponzi" scheme. Richard Goettlich conducted the fraudulent scheme through First Interregional Equity Corporation ("FIEC"), a registered broker-dealer now in liquidation, and First Interregional Advisors Corporation ("FIAC"), formerly an equipment lease finance company that is now a debtor in bankruptcy. The judgment, which was obtained by default; (a) permanently enjoins Richard Goettlich from committing securities fraud in violation of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder; (b) orders him to disgorge $123,900,000 in ill-gotten gains plus $23,275,277 in prejudgment interest; and (c) requires him to pay $123,900,000 in civil penalties.
From at least 1993 to 1997, Richard Goettlich, FIAC, and FIEC defrauded investors by offering and selling purported interests in equipment leases. Specifically, Richard Goettlich and the other defendants systematically purported to assign the entire receivable stream from a single equipment lease to one investor after having previously assigned that same receivable stream to one prior investor, and sometimes to two or three prior investors. Also between 1988 and 1997, Richard Goettlich misappropriated government and municipal bonds from the accounts of FIEC customers, and used the proceeds of the stolen bonds to fund his lavish lifestyle and satisfy FIECs net capital requirements, among other things. As a result of the fraud, Richard Goettlich and the other defendants obtained approximately $295 million from investors -- an amount that exceeded FIACs actual lease receivable inventory by at least $100 million.
When the Commission commenced this action against Richard Goettlich, FIAC, and FIEC in 1997, it obtained temporary restraining orders, preliminary injunctions, the appointment of receivers, asset freezes and other emergency relief to halt the fraud. The default judgment was entered after Richard Goettlich failed to answer or otherwise respond to the Commissions complaint.
Separately, the Office of the United States Attorney for the District of New Jersey charged Richard Goettlich criminally for his role in the FIAC-FIEC "Ponzi" scheme. On November 18, 1998, Richard Goettlich pleaded guilty to an eight-count Information charging him with one count of conspiracy to commit securities fraud, one count of conspiracy to commit tax offenses, two counts of securities fraud, one count of tax evasion, two counts of money laundering and one count of illegal wiretapping.
In a separate action, the Commission has charged two other individuals for their roles in the FIAC-FIEC "Ponzi" scheme -- Anthony Gianninoto, formerly a financial operations principal of FIAC and FIEC, and Eileen Laine, formerly a data processing manager for those companies. The Commissions case against those two individuals, who have also pleaded guilty to criminal charges arising out of this fraud, remains pending.
For more information see Litigation Release Nos. 15276 and 15979.http://www.sec.gov/litigation/litreleases/lr16160.htm