Investment adviser imprisoned for fraud tied to kickbacks, horse racing

By Nate Raymond

NEW YORK, Feb 13 (Reuters) – A septuagenarian investment adviser was sentenced to six years in prison on Friday for defrauding clients by funneling money to a New York horse racing firm and small, thinly traded companies in exchange for secret kickbacks.

James Tagliaferri, who managed TAG Virgin Islands Inc in St. Thomas, was also ordered to forfeit $2.5 million and a Virgin Islands property after U.S. District Judge Ronnie Abrams in Manhattan heard from victims of his scheme.

“You breached that trust, and you should be ashamed,” Abrams said.

Tagliaferri, who testified at trial in his own defense, denied intending to deceive investors. He nonetheless on Friday called his actions “deplorable.”

“It’s a burden that’s very hard to bear, and I want to apologize again,” Tagliaferri told the judge.

A federal jury in July found Tagliaferri, 75, guilty on charges including investment adviser fraud, securities fraud, and wire fraud stemming from a scheme authorities said caused his clients to lose millions of dollars.

Prosecutors said Tagliaferri invested more than $120 million of funds he oversaw at TAG Virgin Islands in private or illiquid companies in exchange for at least $3.35 million in kickbacks.

When some clients began demanding their promised returns, Tagliaferri used other clients’ funds to repay them in a Ponzi scheme-like fashion, and to make payments for companies he was affiliated with, prosecutors said.

Among those companies was International Equine Acquisitions Holdings Inc, a Garden City, New York-based company that owned thoroughbred racehorses.

The horses included Big Brown, a stallion that won the 2008 Kentucky Derby and Preakness Stakes before coming up short in his attempt to complete the Triple Crown at the Belmont Stakes.

Tagliaferri, a resident of Connecticut and the U.S. Virgin Islands, also created false documents to conceal his fraud, prosecutors said.

The scheme, which ran from 2007 to 2010, aimed to defraud more than 100 clients of TAG Virgin Islands, which reported having about $252 million under management in 2009, prosecutors said.

Three victims spoke at Friday’s sentencing hearing, including Richard Schapiro, whose parents invested with Tagliaferri and would be “heartbroken by his betrayal.”

“I hope he rots in jail,” Schapiro said.

The case is U.S. v. Tagliaferri, U.S. District Court, Southern District of New York, No. 12-cr-00115.

(Reporting by Nate Raymond in New York)

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