MANHATTAN (CN) - Financial adviser Kenneth I. Starr bilked his "high net-worth, celebrity clients," who reportedly included Uma Thurman and Martin Scorcese, in a $30 million Ponzi scheme, prosecutors claim in Federal Court. Starr allegedly used his unfettered access to his clients' accounts to buy himself a $7.5 million Upper East Side condo.
"Starr marketed his services as an accountant and financial adviser to clients, gained control over millions of dollars belonging to his clients, and then misappropriated millions of dollars of his clients' assets for his own personal use, including to purchase himself a new multi-million dollar residence," according to the 37-page complaint.
"Starr persuaded clients to invest money with him by promising to invest their monies in safe investments and then diverting the monies both directly to himself and to risky investments, which he, his wife and his close associates, held undisclosed financial interests."
Before taking his clients' money, Starr (not the Clinton-Whitewater Starr) wired the funds to an attorney's trust account so that they appeared to be directed to legal and appropriate investments, the complaint states.
Prosecutors say Starr "systematically defrauded" the 200 clients of Starr & Co. and ran a Ponzi scheme in which he transferred money between clients' accounts to meet their needs.
The complaint describes seven anonymous clients, including an actress pegged as Uma Thurman in various media reports, and a 99-year-old heiress thought to be Rachel "Bunny" Mellon.
When "Client-1," described in the complaint as a former hedge fund manager and well-known philanthropist, hired Starr as an accountant in March 2009, Starr offered investment advice, but "Client-1 demurred because she had her own connections in the financial world and did not need Starr's assistance," the complaint states.
Prosecutors say the client grew suspicious of Starr when there were "constant delays" in a real estate deal he was supposed to help steer, and she told her bank representatives at HSBC to notify her of any wire transfers from her accounts.
When Starr tried to transfer $750,000 from the client's account to the attorney trust, she learned from one of Starr's associates that the money was going toward the Upper East Side condo, according to the complaint.
Prosecutors say a review of the client's account showed that Starr had transferred $2.2 million the same way, when the client only authorized a $500,000 transfer for the real estate venture.
"Client-2," an actress reported to be Thurman, noticed in the last six months that Starr was sending confusing monthly account statements that showed her assets had dropped significantly even though no one had notified her, the complaint states.
Prosecutors say the actress's bank notified her that Starr was trying to transfer $1 million to his associate, and she stormed into Starr's office with her lawyers.
Starr returned the money to Client-2's account, but he allegedly transferred another $1 million to the trust account from "Client-3," described as a former talent agency executive. The Daily Beast has reported the client is Jim Wiatt, the former head of William Morris.
Starr is charged with wire fraud, fraud by an investment adviser and money laundering. His son, former Manhattan borough president Andrew Stein, was also charged with making false statements in an IRS filing and to a federal officer.
Stein, "a former national officer of a major political party and a partner at a prominent national law firm," owes $2.1 million in back taxes for years between 2003 and 2009, according to the complaint.
Prosecutors say Stein, who lost a bid for mayor of New York in 1993 and reportedly dated conservative commentator Ann Coulter, concealed and denied the existence of his shell company, Wind Rivers. He also failed to disclose the company's bank account, as well as the fact that he used credit cards belonging to third parties or that he rented a luxury summer home in Bridgehampton, N.Y., according to the complaint.
Starr did not reveal that he had a personal interest in the companies like Wind Rivers where he routed investor funds, according to prosecutors. Other recipients allegedly included Universal Identification Solutions, which Starr partially owns; Glassnote Entertainment Group, an agency where Starr's wife works; Sundown Hills, whose bankruptcy filing was signed by a "retired prominent basketball player;" and Bregman Productions.
The former pro athlete is reported to be Julius "Dr. J" Erving, a hall of famer with the Philadelphia 76ers. Erving filed a bankruptcy petition in Atlanta on behalf of Sundown Hills, according to media reports.
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