Feds expand scope of Forte case
Federal officials said the scope of Joseph S. Forte's investment fraud was larger than estimated in January, when the Delaware County man was charged in a Ponzi scheme that reportedly began in 1995.
Federal officials said the scope of Joseph S. Forte's investment fraud was larger than estimated in January, when the Delaware County man was charged in a Ponzi scheme that reportedly began in 1995.
The Securities and Exchange Commission said in a court filing Tuesday that Forte raised $75 million from more than 115 investors in his fraudulent partnership.
In interviews with investigators before charges were filed in January by the SEC and the Commodities Futures Trading Commission, Forte had estimated those figures at $50 million from nearly 80 investors, according to court documents.
In the latest filing, an unopposed motion to hire a receiver, authorities estimated losses by investors at $34 million and said investigators had located just $125,000 in liquid assets.
Forte used much of the money from new investors to pay high returns to existing investors, the hallmark of a Ponzi scheme. Other amounts went to Forte, his family, and "others 'employed' or otherwise associated with the partnership," the filing said.
A key figure associated with the partnership was John N. Irwin, a Villanova certified public accountant who was Forte's original limited partner and prepared unaudited reports for investors based on data Forte provided.
Irwin's attorney, Ellen C. Brotman, said that along with all the other victims of this scheme, Irwin is pleased that the SEC is continuing to work diligently to take affirmative and appropriate steps to get this matter resolved.
Forte told investors in a report sent last fall by Irwin, who is not charged in the case, that the partnership was worth $154 million on Sept. 30. The actual balance of his trading account was $146,814. By December, when Forte confessed the fraud to authorities after a desperate effort to raise more money, the account had dwindled to $3,000.
The SEC and the CFTC asked federal Judge Paul S. Diamond to appoint a receiver to preserve existing assets, locate additional liquid assets, oversee the sale of real estate, and to consider whether money could be retrieved from investors who received payouts from the Forte partnership.
Some investors have said they withdrew money from the fund to pay taxes on profits that turned out to be illusory. It is possible that some of those investors, victims themselves, might have to pay into a fund that would be distributed equitably.
A major Forte investor, the Thornton D. & Elizabeth S. Hooper Foundation, handed out millions in grants in recent years, including $1.55 million to the U.S. Naval Academy Foundation in the three years ended June 30, 2007. It was not clear whether any of that money would be subject to so-called clawback provisions.
The SEC recommended the appointment of Marion A. Hecht, a managing director at Goodman & Co., of Washington, as receiver. Her lawyer will be Ronald S. Gellert, a partner in the Philadelphia office of Eckert, Seamans, Cherin & Mellott L.C.C., the SEC said.
