Sports donor charged in multi-million dollar fraud

April 22, 2010

A local businessman was charged and arrested for running a multi-million dollar investment scam. The case is like so many that have occurred over the past couple of years. Considered a philanthropist, he donated large sums of money to the University of Miami. A federal indictment charged Nevin Shapiro with one count of money laundering and one count of securities fraud. The Securities and Exchange Commission also levied civil fraud charges. Shapiro based on the charges is facing up to 20 years in prison and fines of up to $5 million. He surrendered to federal authorities in New Jersey where he appeared with counsel from a criminal defense law firm. Shapiro was granted a $10 million bond by the federal magistrate at the pre-trial detention hearing.

A pre-trial detention hearing occurs one or two days after the initial arrest is made by law enforcement. The defendant is entitled to appear before a federal magistrate and request a bond or other forms of pre-trial release. The federal magistrate will consider two factors in determining whether pre-trial release is appropriate. First, the defendant's risk of flight will be analyzed. The court will consider an individual's ties to the community, such as property ownership, location of family, travel history and overseas bank accounts. If the court believes that a defendant is not a flight risk, typically they will require the defendant to surrender travel documents such as passports and visas to prevent any travel outside of the country. Secondly, the court will consider whether the defendant is a danger to the community. The court will mostly consider the charges pending against the defendant. White collar crimes are more likely considered not to be a danger to the community as opposed to drug trafficking or other crimes which involve violence or will cause physical harm to the general public.

If the federal magistrate determines that a person is not a flight risk or a danger to the community, he will set a bond commensurate with the charges. There are several types of bonds that can put in place by the magistrate including personal surety and corporate surety bonds. Personal surety bonds allow for the defendant or family members to sign over homes and property that are subject to forfeiture if the defendant fails to appear in court. Corporate surety bonds require a bondsman to post a percentage of the total bond to secure a defendant's release. On many occasions those bonds are preferred by the court because if the defendant fails to appear at a hearing, the bondsman is in jeopardy of losing the entire amount of the bond. If the defendant fails to appear, the bondsman or his representatives will seek out the defendant to protect their interests. The court can also imposed a combination of different types of bonds to ensure the defendant does not flee the jurisdiction.

Shapiro was granted the bond despite the large amount of money involved in the alleged scheme to defraud. The indictment alleged that he sold securities through his investment firm's wholesale grocery distribution business. He promised investors an annual 26% return on their investments. As with all Ponzi schemes, much higher than normal annualized returns are a signal that something is amiss. The indictment alleges that Shapiro used stolen funds to support a lavish lifestyle. He purportedly spent investor's funds on jewelry, homes, yachts, tickets for sporting events and made large contributions to the University of Miami. Shapiro is now added to the list of people charged with defrauding investors.

U.S. Charges Miami Sports Donor with $900 Million Fraud, Reuters.com, April 22, 2010.