NEW YORK (Reuters) - A businessman pleaded guilty on Wednesday to swindling about $880 million from people throughout the United States who believed they were investing in a grocery distribution business but were instead helping to support his luxury lifestyle.
Nevin Shapiro of Miami Beach, Florida, admitted in federal court in Newark, New Jersey, that he fraudulently touted the profitability of his company, Capitol Investments USA Inc, when it had virtually no income-generating business.
U.S. prosecutors said that between January 2005 and November 2009, Shapiro ran a typical Ponzi scheme in which new investor money was used to make payments to existing investors and to support his lavish lifestyle.
The scheme is one of many that have unraveled in the financial crisis, the most noteworthy being the multibillion-dollar fraud perpetrated by New York financier Bernard Madoff, who is serving a 150-year prison term.
Shapiro misappropriated investor funds for illegal sports gambling debts, payments to dozens of student athletes and floor seats to watch the Miami Heat professional basketball team, among other things, the office of the U.S. Attorney in Newark said in a statement announcing the guilty plea.
Shapiro also spent $26,000 per month on a mortgage on a $5 million Miami Beach home, $7,250 per month for payments on a $1.5 million Riviera yacht and $4,700 per month for the lease of a Mercedes-Benz S65 AMG automobile.
“Nevin Shapiro made a name for himself as a big contributor to student athletics -- showering his favorite players with gifts and cash, living the high life, and rubbing elbows with the pros,” U.S. Attorney Paul Fishman said. “Today, Shapiro admitted that he built the facade of his lifestyle with money he stole from those who trusted him.”
Shapiro, 41, was arrested in April on fraud charges, five months after he and his Capitol company were forced into bankruptcy.
The securities fraud charge to which Shapiro pleaded guilty carries a maximum potential penalty of 20 years in prison and a $5 million fine. Shapiro also pleaded guilty to money laundering, a charge that carries a sentence of up to 10 years.
Sentencing is scheduled for January 4.
The case is USA v Nevin Shapiro, U.S. District Court in Newark, New Jersey, No. 10-471.
Reporting by Grant McCool; Editing by Lisa Von Ahn