Jew Corrupter: Fund Mgr Ed Stein Guilty in $30 Million Fraud

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Fund Manager Stein Pleads Guilty to $30 Million Fraud

By Patricia Hurtado

June 22 (Bloomberg) -- New York hedge-fund manager Edward T. Stein pleaded guilty to running a $30 million fraud and the friends and acquaintances who he preyed on urged a federal judge to immediately jail him.

Stein, 59, admitted today to four counts of securities fraud and one charge of wire fraud. He was initially accused March 31 of cheating a client out of $6.5 million. Stein faces as much as 19 years and seven months in prison, prosecutors said in court today.

"I used very poor judgment and I know what I did was wrong," Stein told U.S. Magistrate Judge James Orenstein in Brooklyn, New York. "I want to explain to the court how sorry and ashamed I am."

Stein was allowed to remain free on a $2 million bond and ordered to restrict his travel within southeastern New York. Brian Maas, a New York lawyer representing Stein, declined to comment after court.

The SEC also filed a separate civil action that accused Stein, who controls Gemini Fund I hedge fund, DISP LLC and Prima Capital Management Corp., of moving millions of dollars from at least 83 investors through accounts he controlled, according to the complaint filed in federal court in Manhattan.

Stein, who founded DISP, a firm investing in life- settlement policies, deceived clients since 1992 and resorted to stealing their assets, the SEC said in its civil suit.

Gemini, Detour Media

Without telling investors, Stein arranged for Gemini to make its main investment in Detour Media Group Inc., the fashion-magazine publisher that filed for bankruptcy in 2003, the SEC said. Since then, he has used money from new investors to pay returns to "selected" Gemini clients, the agency claimed. He also used investor funds to buy a $1 million condominium in Manhattan, the SEC said.

Stein ran Prima Capital Management Corp. from his offices in Roslyn, New York. Another company, Prima Capital Management Inc. of Denver, said in a statement that it has "no affiliation in any way" with Stein, his hedge funds or DISP.

At least a dozen of Stein's victims told U.S. District Judge Jack B. Weinstein at an earlier hearing today of how Stein had befriended and then defrauded them, promising to handle their investments and then leaving many of them financially wiped out. Weinstein said he asked Orenstein, the magistrate, to handle the guilty plea and a hearing on whether Stein should remain free.

'Squandered Our Future'

"My husband and I are in our mid-seventies," Rita Clark told Weinstein. "We have faithfully saved for 50 years and he has trashed 50 years of our hard work and squandered our future. This is a tremendous betrayal."

A woman who refused to give her name to the court said Stein had defrauded her out of $6 million after both her parents had died, and used the funds to buy himself a Manhattan apartment.

"A lot of people here who are losing their homes and I don't understand why he should be allowed to live in a luxurious Upper East Side apartment when other have lost everything," she said.

Shelly Anderson cried as she spoke in court.

"He went into everything I had: My retirement account, my savings, my pension, my 401(k)," she said. "I'm 57 years old and it's devastating. Everything I have I rolled over to him. I don't have a home, I don't have any children to take care of me. This was it."

After victims expressed concerns that Stein may flee the country using hidden funds, Orenstein directed that two relatives of the defendant agree to sign his bond. Stein has been free on bail since his arrest on April 1.

100 Years

Stein agreed in his plea that he won't appeal if he's sentenced to less than 21 years and nine months in prison, Orenstein said. Sentencing by Weinstein is scheduled for September 28.

"Stein's records are in disarray and he has produced no evidence to date that any of the funds he collected from investors are currently invested," the Securities and Exchange Commission said in its April 1 complaint. "Stein solicits new investors even though his and the Stein entities' financial condition appear dire."

The initial criminal complaint against Stein alleged that he promised to invest the customer's money in annuities and instead used the money for other purposes, depositing some into personal accounts and bank accounts he controlled.

'Substantial' Inheritance

The unidentified victim sought out Stein as a financial adviser after inheriting a "substantial" sum of money, according to prosecutors in the office of Brooklyn U.S. Attorney Benton Campbell.

Nancy Brown, a lawyer for the SEC, told Weinstein today that the SEC and a court-appointed receiver had frozen all the assets that her office has been able to identify as belonging to Stein.

"We will continue to investigate until we've uncovered everything we can uncover," Brown told the judge.

As part of his criminal plea, Stein agreed to help authorities find assets to help compensate his victims.

The regulatory case is SEC v. Stein, 09-cv-3125, U.S. District Court, Southern District of New York (Manhattan). The criminal case is U.S. v Stein, 09-CR-377, U.S. District Court, Eastern District of New York (Brooklyn).

To contact the reporter on this story: Patricia Hurtado in New York at http://www.bloomberg.com/apps/news?pid= ... _bqFgJCFkM