A state Superior Court judge has ordered the perpetrators of a Ponzi scheme – including a Brick man – to pay $8.6 million in full restitution for the benefit of defrauded elderly investors and $5.49 million in civil penalties.
Superior Court Judge Thomas M. Moore, sitting in Newark, ordered Michael William Kwasnik, a suspended New Jersey and Pennsylvania attorney now residing in Aventura, Florida; Joseph Michael Schifano of Brick, a former registered agent of a broker-dealer; and Daniel Francis McCorry, formerly from Ventnor, now residing in Florida, also a former registered agent of a broker-dealer, pay the nearly $14 million.
The ruling was handed down at the behest of the state Bureau of Securities. Schifano’s share of the civil penalty is $920,000, the judge ruled, while all three defendants will share the $8.6 million in restitution.
The court, according to the state attorney general’s office, found that Kwasnik, Schifano and McCorry fraudulently offered and sold notes to 73 elderly investors on behalf of Cherry Hill-based Liberty State Financial Holdings Corporation through its subsidiary, Liberty State Benefits of Pennsylvania, that they falsely claimed to be “safe,” “secure,” and “guaranteed” a 12 percent annual rate of return. Investors were also falsely told that funds raised by the sale of the three-year notes offered by the company would be used to purchase life insurance policies and beneficial interests in Irrevocable Life Insurance Trusts.
In reality, investor funds were improperly used by defendants in a Ponzi scheme-like manner to pay existing investors with new investor funds and also transferred to the three defendants, members of Kwasnik’s family, and a law firm Kwasnik controlled. The state’s legal action was also filed against Kwasnik’s father, William Kwasnik.
“Elderly investors are increasingly the target of investment fraud due to the fact that they typically own tangible assets and pensions that are attractive to con artists,” Acting Attorney General John J. Hoffman said. “All investors, and especially senior citizens who have built up their assets over time, must be extremely cautious when being offered investments that sound too good to be true.”
Schifano and McCorry were both disciplined by the state in 2005, under a securities enforcement action unrelated to the present case.
“Any ‘guarantee’ of an investment return, like the 12 percent annual rate of return promised to investors in this case, should be a clear warning sign of fraud,” noted Steve Lee, Acting Director of the New Jersey Division of Consumer Affairs. “Investors should be careful that they don’t buy into false and empty promises of risk-free investments.”