Former Capitol Investments CFO and Accountant Sentenced to Years in Prison for Roles in $930 Million Ponzi Scheme

NEWARK, NJ—The former chief financial officer (CFO) and an accountant with Capitol Investments USA Inc. were sentenced today to 48 and 46 months in prison, respectively, for assisting Nevin Shapiro in the operation of a $930 million Ponzi scheme linked to a fictitious wholesale grocery distribution business, New Jersey U.S. Attorney Paul J. Fishman announced.

Roberto Torres, 77, of New York, formerly of Lighthouse Point, Fla., and his son, Alejandro Torres, 40, of Boca Raton, Fla., each previously pleaded guilty before U.S. District Judge Susan D. Wigenton to one count of securities fraud. Judge Wigenton also imposed the sentences today in Newark federal court.

According to documents filed in this and related cases and statements made in court:

Roberto Torres, the CFO of Capitol Investments USA Inc., and Alejandro Torres, an accountant at Capitol, used the company to assist Shapiro, 42, of Miami Beach, Fla., in fraudulently obtaining approximately $930 million between January 2005 and November 2009. The Torreses admitted that Capitol had virtually no income-generating business during that time and that they assisted Shapiro in operating the Ponzi scheme by using new investor funds to make principal and interest payments to existing investors and to fund Shapiro’s lavish lifestyle.

In particular, the defendants admitted to creating, or directing others to create, fraudulent documents which falsely touted the profitability of Capitol’s fictitious grocery diversion business. The Torreses admitted that those documents included: profit and loss figures fraudulently representing that Capitol’s wholesale grocery business was generating tens of millions of dollars in annual sales; personal and business tax returns for Shapiro and Capitol also fraudulently reflecting those sales; and numerous invoices fraudulently reflecting transactions between Capitol and other companies in the wholesale grocery business.

The Torreses admitted that more than 50 victim investors lost a total of between $50 and $100 million as a result of the scheme. Beginning in January 2009, Shapiro and Capitol began failing to make required principal and interest payments to investors. Shapiro and Capitol were forced into bankruptcy in November 2009. At that time, they owed more than $100 million to victim investors.

In addition to the prison terms, Judge Wigenton sentenced Roberto and Alejandro Torres each to three years of supervised release and ordered them to pay $82 million in restitution, jointly and severally with Shapiro.

Shapiro pleaded guilty to one count of securities fraud and one count of money laundering on Sept. 15, 2010, and was sentenced to 20 years in prison on June 7, 2011.

Sydney Jack Williams, 63, of Naples, Fla., pleaded guilty on Sept. 27, 2011, to subscribing to a false tax return. He is currently scheduled to be sentenced on Jan. 10, 2012.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, and special agents of IRS - Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, for the investigation. He also thanked the Securities and Exchange Commission’s Miami Regional Office, under the direction of Eric Bustillo.

The government is represented by Assistant U.S. Attorney Jacob T. Elberg of the U.S. Attorney’s Office Criminal Division in Newark.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.