The Term “Ponzi” Became A Buzzword

Hollywood accountant to the stars, Kenneth Starr, was recently sentenced to 7 1/2 years of jail time for committing a $30 million dollar plus Ponzi scheme. Starr served as a financial advisor and accountant to many current and past celebrities, such as Oscar-winner Natalie Portman, actress Uma Thurman and actors Wesley Snipes, Al Pacino, Martin Scorsese and Sylvester Stallone, to name just a few. The Securities and Exchange Commission proposed a new rule earlier this month – which would require “certain financial institutions” to DISCLOSE the structure of their “incentive-based compensation” practices to federal regulators. This new requirement would PROHIBIT such institutions from maintaining employee compensation arrangements that encourage inappropriate RISKS in the investment offerings to their clients. The proposed rule stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act, and requires the SEC, along with several other federal financial regulators, to jointly write rules and guidelines that govern incentive-based compensation practices. Kenneth Starr, age 67, was found GUILTY of defrauding investors. Prosecutors estimate that $33.3 million dollars of investor’s money was used inappropriately, including: buying a $7.5 million dollar apartment in Manhattan, repaying some clients who caught him cheating, and to cover a $4 million dollar legal settlement he owed. In addition to his undisclosed list of current celebrity clients and victims, were a former hedge-fund manager, a 100-year old heiress to a family fortune, a well-known philanthropist and a longtime friend. While the charges of wire fraud, money laundering and investment adviser fraud could have cost him up to 15 years in prison, Starr asked the judge if he could serve just 5. While he pled GUILTY to all charges, he requested the reduced sentence, because all of his victims were “incredibly wealthy” individuals with millions of dollars in discretionary funds. The presiding judge AGREED with his argument, and opted to go lenient on Starr and meet in the middle with just a 7 1/2 year prison sentence. Her reasoning was that although he lost his client’s trust, none of the money lost made any devastating or lasting impact on their livelihood. Wesley Snipes however, is currently serving time in prison for tax evasion, to which he blames at least some of the error on Kenneth Starr’s accounting “practices.” And both Martin Scorsese and Al Pacino have recently been given “past due” tax notices by the IRS – and just like Wesley Snipes, both of them also blame Starr for his accounting errors. Kenneth Starr is just the latest of a number of Ponzi - schemers to get caught and receive jail time. In 2009, the term “Ponzi” became a buzzword, due in part to the infamous actions of Bernie Madoff, as well as the more than 150 Ponzi schemes identified and brought to justice that year. In 2011, many of these scammers and con artists are having THEIR day in court and forced to “face the music,” and exchange their custom suits for a fancy orange jump suit!