Feds stop alleged $26M LI Ponzi scheme
Executives of a Long Island paver company were arrested Thursday and charged with operating a four-year Ponzi scheme that bilked investors out of $26 million.
The Securities and Exchange Commission obtained an emergency court order Thursday to stop the alleged scheme that promised investors rich returns on water-filtering natural stone pavers, but instead took them for about $26 million, according to a statement from the SEC.
The federal complaint, filed in U.S. District Court for the Southern District of New York, alleges that convicted felon Eric Aronson and others defrauded investors in PermaPave Cos., a group of firms based on Long Island and controlled by Aronson.
The U.S. Attorney’s Office for the Eastern District of New York, which conducted a parallel investigation of PermaPave’s operations, filed criminal charges against Aronson, and other PermaPave execs Vincent Buonauro Jr. and Robert Kondratick, who were arrested on Thursday.
About 140 people, many working in the construction or landscaping business, invested in the scheme between 2006 and 2010, according to the SEC. They were told that PermaPave had a tremendous backlog of orders for pavers imported from Australia, which could be sold in the U.S. at a substantial mark-up, yielding monthly returns to investors of 7.8 percent to 33 percent. In reality, the complaint charges that there was little demand for the product, and the cost of the pavers far exceeded the revenue from sales.
Lacking the profits promised to investors, the SEC claims that Aronson, Buonauro and Kondratick used new investments to make payments to earlier investors and then siphoned off much of the rest for luxury cars, gambling trips to Las Vegas and jewelry. The complaint also alleges that Aronson used investors’ money to make court-ordered restitution payments to victims of a previous scheme to which he pleaded guilty to conducting in 2000.
Attempts to contact PermaPave executives were unsuccessful.
George Canellos, director of the SEC’s New York office, said Aronson and his associates operated the PermaPave as a classic Ponzi scheme.
“They created the façade of a profitable business, promised investors extraordinary rates of return, and used much of their investors’ money to fund their own lavish lifestyle,” Canellos said in the statement.