Wednesday, May 5, 2010

Federal court orders SEC to return $795,000 lost in Connecticut fraud scheme

The federal district court in New Haven has ordered the U.S. Securities Exchange Commission to return $795,000 to the Connecticut Retirement and Trust Funds for the benefit of investors who were harmed investors by a fraudulent scheme perpetrated by the former president of the Connecticut State Senate, William A. DiBella.

On May 18, 2007, following a seven-day trial, a jury returned a verdict finding DiBella liable for aiding and abetting violations of various securities laws.

In its 2004 complaint, the SEC alleged that DiBella and his consulting company, North Cove, participated in a fraudulent scheme with former state Treasurer Paul Silvester, concerning Silvester's investment of $75 million on behalf of the Connecticut Retirement and Trust Funds with investment advisor, Thayer Capital Partners.

Although neither Mr. DiBella nor North Cove had any role in the investment of the funds with Thayer, and performed no meaningful work related to the investment, Silvester nevertheless requested that Thayer pay DiBella fees based upon a percentage of the total investment with Thayer.

Thayer ultimately paid DiBella a total of $374,500 through North Cove, according to court records.

On March 24, 2008, the court entered a final judgment against DiBella ordering him to pay a civil penalty and disgorgement and prejudgment interest. Due to Mr. DiBella's continued non-payment of the judgment, the SEC instituted contempt proceedings with the federal court in New Haven.

DiBella finally paid more than $795,000 on March 12, and the money will now be distributed to the Connecticut Retirement and Trust Funds.

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