The former owner, CEO and president of Commercial Mortgage and Finance Co. was indicted by a federal grand jury with 17 counts of mail fraud, one count of wire fraud and one count of securities fraud in connection with a scheme to defraud the company’s investors.
According to the indictment, Anthony D’Agostino raised capital for his Rockford, Ill.-based business by selling installments of promissory notes and certificates of participation to investors. The indictment alleges that D’Agostino concealed from the investors that Commercial Mortgage had a negative net worth that gradually increased while he owned the company.
Additionally, the indictment claims that the defendant did not disclose to the investors that his company was operated as a Ponzi scheme, with money received from the sales of new promissory notes being used to pay principal and interest owed on older promissory notes.
D’Agostino also allegedly made false statements to several of the investors, such as notifying them that the financial state of the company was stable and that their investments were safe and secure.
The supposed fraud scheme took place from August 1997 through October 2008, the indictment said. In total, investors lost approximately $20 million.
Commercial Mortgage and Finance filed for Chapter 11 bankruptcy in October 2008 with $60 million of investments from 1,400 creditors, most who used the company’s six- or nine-month promissory notes to invest their savings. These notes had interest rates that were greater than conventional certificates of deposit, but were not insured by the Federal Deposit Insurance Corporation. Therefore, the people who invested with D’Agostino’s company lost all of their savings because of the bankruptcy filing more than four years ago.
Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a possible fine of $250,000. Securities fraud carries a penalty of up to five years in jail as well as a fine of up to $250,000.
