New law on fraud may aid church

A state law enacted in the wake of the Bernard Madoff Ponzi scheme scandal could end up helping people who may have been victimized in a burgeoning crisis at St. Barbara Greek Orthodox Church in Orange.

The state is investigating the possible loss of more than $1 million from the church’s coffers and from parishioners’ private accounts due to an alleged embezzlement scheme.

State Rep. Patricia Dillon, D-New Haven, crafted a “Madoff bill” that allows state authorities to seize assets of anyone convicted of investment securities fraud. The bill was signed into law the same day in June that Madoff was given a 150-year sentence.

“In the case of St. Barbara’s, if the there is a criminal conviction (in state court), the law gives the state the power to seize the assets of the person who is found guilty,” Dillon said.

The mechanism to return money to victims is still being worked out, Dillon said. The state Banking Department must work with other departments and present a study for the establishment of restitution fund to the General Assembly by March 31, according to a provision in the bill.

The federal government has a similar law, which would supercede the state law if the case ends up in federal court. The FBI has been notified about the alleged embezzlement.

Church officials and parishioners are still trying to piece together the extent of the damage, with the church community questioning who was watching the money.

“We don’t know all the information and we are being very careful in not speculating,” said Gregory Stamos, the church’s general counsel. “While the shock of the news is still settling in and we’re trying to determine the extent of any damage we are experiencing (at the church), what we’re seeing here is individuals coming to each other’s aid and helping each other with their personal losses,” Stamos said.

Several sources inside the church community identified the man in charge of the church’s investments as church member Gregory Loles. Loles has not been charged or identified as the target of any official investigation. Several parishioners invested their own savings with Loles, sources said.

The church has contacted the FBI, and state Attorney General Richard Blumenthal also is looking into what could be a more than $1 million fraud.

Church member and State Rep. Themis Klarides, R-Derby, said Friday that parishioners are anxious to learn more about the crisis.

“The state and the feds are now working together for the people of the church and anyone who may have been a victim,” she said.

Citing the investigations, Stamos would not say who oversaw the church’s investments or what sort of oversight was established to shield the parish from possible fraud.

Dillon said she became aware of how many financial scandals work while researching the new legislation.

“It so often turns out to be someone you know and trust, or they have some sort of social validation, someone who belongs to the right club or is looked up to in the community,” Dillon said.

James Heckman, spokesman for the state Banking Department, said his department’s consumer outreach program puts out a variety of educational materials to assist investors and other members of the public.

Anyone can verify the credentials of a broker-dealer or financial adviser with the FINRA’s BrokerCheck at www.finra.org; the Investment Adviser Public Disclosure Web site www.adviserinfo.sec.gov; and state databases at www.ct.gov/dob.

Financial experts said having a referral from a trusted source is a start, but, as the Madoff scandal shows, that’s not foolproof.

Joseph DeDomenico, owner of DeDomenico Wealth Management in North Haven and a past president of the Financial Planner Association of Greater New Haven, said the FINRA broker check is a good starting point to when evaluating a wealth manager.

“Take a look at the record so you have something aside from word of mouth,” he said.

Under most circumstances, customers should write checks to a financial institution rather than an individual person, and documentation should also come from that financial institution, DeDomenico said.

DeDomenico said a certified financial planner is preferable because they are required to undergo continued education and follow to a code of ethics.

But DeDomnico cautioned these tips are by no means absolute in all situations.

Records maintained by the state Department of Banking Securities Division do not indicate that Loles is registered as a broker-dealer, investment adviser, agent or investment adviser agent.

A check into Loles’ background shows that from 1993 to 1999 he was registered as a broker-dealer and worked at companies in New York, London, Westport and Hamden.

In 1995, Loles registered his own financial firm, Apeiron Capital Management Inc., with the Connecticut’s secretary of the state.

Although Gregory Loles applied for registration as a broker-dealer agent of Apeiron Capital Management, he did not become registered as an agent of that firm at either the state or federal level, according to state records.

Apeiron Capital Management was a securities broker-dealer, and its registration application was deemed abandoned in the state in 1997.

Loles opened an auto repair shop in Danbury, Farnbacher Loles Motor Sports, that specializes in custom performance upgrades to Porsches and Audis in 2004, according to state records. He is also part owner of a professional racing team.

A Detroit company Tuesday filed a federal lawsuit against Loles and his company, claiming they’re owed nearly $1 million for two custom BMW race cars. Loles entered into the contract although he did not have enough money in an account for the $200,000 needed for the down payment, lawyers for Pratt & Miller Engineering & Fabricating allege.

Loles contracted Pratt & Miller in Detroit to build him two GAGT-BMW-M3Rs, each costing $340,000. The custom parts installed on the cars pushed the total price to $929,750.

A $200,000 down payment check drawn from a Farnbacher Loles Motorsports’ bank account bounced in September. Pratt & Miller allege Loles knew all along the firm didn’t have the funds for the check, but told Pratt & Miller not to stop work on the cars and not to talk to other potential customers.

When notified of the problem with the check, Loles said he would wire money, according to the lawsuit. Instead, he knowingly gave Pratt & Miller a fraudulent wire reference number, Cynthia J. Haffey, the Detroit attorney representing Pratt & Miller, wrote in the complaint.

Reached by phone in Chicago, Haffey declined to comment on the lawsuit.

“The complaint speaks for itself,” she said.

Repeated calls placed to Loles’ home in Easton and his auto shop in Danbury were not returned.

Peter Tsakonas, a member of St. Barbara, said he didn’t give Loles any money to invest, but the two are friends and he’s reserving judgment until the investigation is completed. Tsakonas said although he hasn’t seen Loles in recent days, he saw him at a dance a few weeks ago and everything appeared normal.

“Knowing him the way I do, I can’t under any circumstances believe he did something so vicious and bad,” he said. “He’s a guy who will steal your heart … You’ll fall in love with him.”

James Tinley can be reached at jtinley@nhregister.com or 203-789-5702.