Tuesday, January 25, 2011

"Before he knew it, he was in the middle of a Ponzi!"

OH SNAP! Everything was great then next thing I knew, I found myself in the middle of a $40 million dollar Ponzi scheme! WTF!? That's how we're to believe Hialeah jeweler Luis Felipe Perez got caught up running a $40 million dollar Ponzi scheme. From the Miami New Times article last June...
Havana-born Perez ran a jewelery and pawn shop business, and promised investors returns of anywhere from 18 to 120 percent a year through monthly payment.

Investors thought they were investing in two of Perez's companies, Lucky Star Diamonds Inc. and Luis Felipe Jewelry Design Corp. (neither had employees other than Perez), and that their money was collateralized by diamonds. In fact, Perez said he kept diamonds in deposit safes, however they turned out to be fake.
There's a sucker born every minute, isn't there? Who could possibly believe that some two bit jeweler could provide a 120% return on an investment? Like many many other Ponzi schemers of the last decade, Mr. Perez's house of cards came falling down during the economic down turn when he was no longer able to recruit new investors. Read the SEC's press release and complaint against Mr. Perez here.

Today we learn that the real cause of Mr. Perez's downfall wasn't the unsustainable lavish lifestyle that he led, but in fact according to his attorney, Alvin Entin, the blame for Mr. Perez's indiscretions lay at the feet of loan sharks, one of which just happened to be the Mayor of the City of Hialeah, Julio Robaina, who's recently announced that he's got his eye on the county mayor seat. Take a look at this story by Jim Defede on Mayor Julio Robaina and his alleged dealings with Ponzi schemer Perez...

Now that's some funny shit. I find the suggestion that Mr. Perez was paying the private lenders that he worked with 36% interest simply laughable. During the real estate boom there were hoards of private lenders running around Miami that routinely lent large sums of money for anywhere from 7% up to 18% annual interest. The suggestion that Mr Perez was paying Mayor Robaina and the like an additional 18% under the table (cash no less) in addition to the 18% that's on the recorded mortgage docs is ludicrous considering how many people were willing to lend at the time for far less. Regardless, if you were to believe Mr Entin, his client Mr. Perez got caught in this vicous cycle of borrowing and paying back money from these "loan sharks" which ultimately led him to this life of crime, in his own words...

“Luis Perez is a nice young man,” Entin said. “He had a jewelry business and borrowed money from people who were loan sharks to get the business moving, couldn’t keep up with the payments to the loan sharks, started borrowing more money and before he knew it he was in the middle of a Ponzi.”
WHOOPS! First you find yourself borrowing money to keep your little business going and then next thing you know, BAM, you're stuck in the middle of a $40,000,000 Ponzi scheme! God damn it, don't you hate when that kinda shit happens! It's even worse when it happens to a "nice young man"! CRAP!

A little further in the interview, we get a some insight into the real motivation behind this amazing tale of private lenders who charge 36% interest rates...
“I can tell you that my client is still cooperating,” Entin said. “There are other subjects and targets of governmental interest out there. My client has provided some very useful information and I think the government is proceeding on it.”
Did you expect any less? Mr. Perez is staring at a ten year stretch in Federal prison and now all of a sudden we get this quasi "press release" with all kinds of documents and personal photos from an "unknown" source that paints a prominent politician in a bad light. Only time will tell if Mr. Perez's "useful information" will succeed in shaving time off his sentence. I've been caught off guard doing a lot of things Mr. Entin, running a 8 figure Ponzi scheme has never been one of them.

It's Miami though, a very, very small town indeed. For those of you following our blog, the old school criminal defense attorney, Alvin Entin, shouldn't be a stranger to you, Mr. Entin represented the central figure in the Barrera Mortgage fraud case, Mr. John Romney.

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