A Lisle man and his Naperville colleague have been charged with 15 counts of fraud between them in an alleged $28 million Ponzi scheme aimed at more than 120 investors and retirees.
Robert C. Pribilski, 54, of Lisle, a principal of USA Retirement Management Services, which had offices in Oakbrook Terrace and southern California, was arraigned this morning in U.S. District Court on five counts of wire fraud and four counts of mail fraud, according to the FBI.
John T. Burns, III, 53, of Naperville, a salesman for USA Retirement who conducted seminars, is facing three charges of wire fraud and three counts of mail fraud.
A third defendant, Mahmut Erhan Durmaz, 42, formerly of Streamwood and Los Angeles, is a fugitive that investigators believe fled the United States for Turkey in 2010. He is facing nine counts of fraud.
The indictment also seeks a forfeiture of $28 million from all three defendants.
According to the FBI’s Chicago office, the defendants conducted estate planning seminars, aimed primarily at retirees in Illinois and California, and purported to sell promissory notes for investments in Turkish bonds to individuals with substantial savings.
Instead, the money went into a Ponzi-type scheme to pay other investors as well as into failed business ventures and to the defendents’ personal expenses, according to the indictment.
The investigation has been underway for years, and the indictment was unsealed only last week. The U.S. Securities and Exchange Commission filed a civil enforcement action against Pribilski and Durmaz in March 2010 in Los Angeles. Durmaz fled the country the same day that a judge froze their personal and business assets.
Also in 2010, the Illinois Department of Insurance barred Probilski from working in the state and fined him $100,000 based on the charges.
But the federal indictment lays out a much more severe penalty for the three men. Each count of fraud carries a maximum prison sentence of 20 years and a $250,000 fine. Restitution is also mandatory.
“Between 2005 and March 2010, the defendants offered and sold promissory notes that falsely represented USA Retirement ‘absolutely and unconditionally’ promised to pay investors between 4.75 and 11 percent annually,” the FBI press release stated. “Pribilski and Durmaz falsely claimed that the interest would be generated from investments in Turkish bonds.”
The indictment also says that Pribilski and Durmaz used about $2.5 million of investor funds to buy themselves homes and cars.
“In offering and selling USA Retirement promissory notes, all three defendants falsely told investors that they had many years of investment banking experience in the purchase and sale of Turkish bonds and that they had personally profited from such investments through USA Retirement,” the FBI said. “In fact, the defendants had no such banking experience and did not make any investments in Turkish bonds.”