A former Connecticut investment advisor has pleaded guilty to tax evasion and faces up to five years in prison in connection with an embezzlement scheme that bilked $5 million from investors.
Jeffrey Arsenault, 63, of Greenwich, waived his right to be indicted and pleaded guilty Dec. 18 before U.S. District Judge Victor A. Bolden in New Haven to tax evasion, according to the U.S. Attorney's Office for the District of Connecticut.
Arsenault, who was the managing member and majority owner of Old Greenwich Capital Advisors LLC, also agreed to pay nearly $2.2 million in restitution to the Internal Revenue Service, as well as nearly $4.7 million in restitution in a related civil case brought by the Securities and Exchange Commission.
The SEC case alleged that Arsenault and Old Greenwich Capital Advisors misappropriated money from the OGCP Fund, which Arsenault used to maintain his and his family’s lifestyle in Greenwich and to make unauthorized payments to Old Greenwich Capital Advisors and to his other ventures.
Old Greenwich Capital Advisors LLC is the investment manager of Old Greenwich Capital Partners LP, a private equity fund of funds.
After the market fall of 2008, Arsenault and Old Greenwich Capital Partners "faced financial difficulties," the SEC order states. "The market downturn caused the OGCP Fund to lose value. Arsenault’s partner split from the OGCP Fund and took with him a significant portion of the assets under management. Arsenault’s house was soon in foreclosure."
Arsenault was released on a $50,000 bond pending sentencing, which is not scheduled, the Justice Department said. Tax evasion carries a maximum five-year prison term.
Case Details
From 2013 through 2022, Old Greenwich Capital Advisors received investment distributions of at least $9.1 million, "which should have been distributed to OGCP investors, reinvested, or used to pay authorized expenses," according to DOJ.
Instead, Arsenault used about $5.2 million to pay his personal expenses or other unauthorized expenses, including payments for college tuition and golf club dues, DOJ said.
From 2019 through 2022, Arsenault, through OGCA, also received about $2.2 million in net income for performing consulting services for third-party investment firms.
"Although he knew that he was entitled to only 70% of the net income based on his OGCA partnership agreement, he kept all of it and used that money for his personal expenses," DOJ said.
From 2013 to 2016, "Arsenault failed to report the proceeds from his embezzlement scheme on his individual federal income tax returns, resulting in income tax due and owing of approximately $1,160,161," the DOJ said.
He failed to file any tax returns from 2017 through 2022, resulting in total tax due of about $1,002,709.
"As part of his embezzlement and tax evasion scheme, from 2017 to 2020, Arsenault booked false intercompany loans between OGCA and OGCP to conceal his misappropriation of investor funds, which caused OGCA and OGCP to file false Forms 1065 and provide Arsenault false Schedule K-1s," DOJ said.
"From 2019 to 2022, Arsenault mischaracterized and concealed from his accountants financial activity, including deposits and wire transfers into his personal bank account, which caused them to prepare false accounting records and tax returns for OGCA," according to DOJ.
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