A federal jury in Central Islip has convicted an advisor and a part-time race car driver on charges of wire fraud, wire fraud conspiracy and money laundering conspiracy, the U.S. Attorney’s office for the Eastern District of New York announced Thursday.
The defendants were accused of stealing millions of dollars from business owners in Long Island and professional athletes.
The verdict followed 10 weeks of trial. Sentencing is scheduled for Nov. 20, when the defendants, Phillip Kenner and Tommy Constantine, a part-time race car driver, will face a maximum of 20 years’ imprisonment for each count and could forfeit up to $30 million they took from victims.
Kenner played hockey at Renssellaer Polytechnic Institute, where he met Joe Juneau, a teammate who would later go on to play in the National Hockey League. The now-retired Juneau testified that he introduced Kenner to other hockey players in the 1990s as Kenner was building his advisory career. According to the Justice Department, Kenner’s clientele included New York Islanders forward Michael Peca, U.S. Olympian Bryan Berard, and Stanley Cup champions Darryl Sydor, Bill Ranford and Sergei Gonchar, among others, “whose careers blossomed just as Kenner took over greater and greater control of their finances and wealth.”
According to the attorney’s office, the fraud started as early as 2003 when Kenner convinced several of his clients to invest $100,000 in a land development deal building luxury estates in Hawaii, and to open lines of credit worth at least $10 million. According to the Justice Department, witnesses testified that Kenner told them the lines of credit would be used to pay initial development costs and would be reimbursed when Lehman Brothers Holdings agreed to loan up to $105 million to the project in 2006.
However, prosecutors established that Kenner borrowed nearly all of his clients’ lines of credit for personal interests in unrelated real estate deals, transferred some of those funds to Constantine, and funded personal expenses for himself and Constantine.
According to the statement issued by the Justice Department, Kenner borrowed against one line of credit to pay monthly interest charges on others, ultimately wiping out his clients’ savings. When the scheme collapsed in 2008, he and Constantine tried to cover up the fraud by convincing investors that their money had been used to fund loans to a Mexican developer, Diamante Cabo San Lucas, which had defaulted on the loans. They told the investors that to get their money back, they should contribute to something they called the Global Settlement Fund, which would pay for litigation against DCSL.
With that fund, Kenner and Constantine raised $2.9 million, $225,000 of which was used in litigation. The rest was used for personal expenses, including an effort by Constantine — unsuccessful — to buy Playboy Enterprises.
Kenner also urged clients to invest in a failing credit card business operated by Constantine, Eufora LLC, in 2008 and 2009. According to the department, approximately $700,000 of their investments was wired to accounts controlled by Kenner, and another $725,000 was sent to accounts controlled by Constantine. Another victim, a Long Island electrician, invested $200,000 in Eufora that was diverted and spent within a day of being wired into an account controlled by Constantine. Recorded phone conversations played for the jury showed that Constantine “offered a series of contradictory explanations” about what the investment bought for the victim and refused to admit he received the money.
The final scheme Kenner was accused of orchestrating is a 25% interest in a Sag Harbor, New York, real estate property he purchased with $395,000 he took from Peca’s line of credit. He also persuaded Berard to invest $375,000 for a 50% stake, which he diluted by half, keeping the rest for himself.
“Driven by personal greed, Kenner and Constantine spent years lying to investors and stealing their money, and then attempted to conceal their fraud by repeatedly and brazenly avoiding responsibility, shifting blame and scapegoating others. Today, their scheme has been brought to an end,” Acting United States Attorney Kelly Currie said in the statement.
FBI Assistant Director-in-Charge Diego Rodriguez said, “After defrauding victim investors out of millions of dollars over many years, the lies, deception and criminal behavior of Kenner and Constantine have caught up with them today. The FBI thanks all of our partners for their assistance with this case.”
“Hopefully, today’s verdict will bring some closure to the victims of Kenner and Constantine,” said IRS Special Agent-in-Charge Shantelle Kitchen. “Their success in defrauding so many individuals reinforces how important it is to use care when investing, no matter how much confidence you have in the individual or company you are investing with. Fortunately, federal law enforcement strives to be vigilant in uncovering fraud schemes and thorough in its investigation of them.”
— Check out Ex-NFL Player Accused of Ponzi Scheme: SEC on ThinkAdvisor.