Kenneth Starr, a celebrity financial adviser to stars including actors Wesley Snipes and Sly Stallone, was charged with carrying out a massive $30 million fraud on his clients and then spending the money on a luxury apartment and jewelry, federal prosecutors said. Starr, head of the Manhattan-based Starr and Co., was charged with wire fraud, fraud by an investment advisor, money laundering, making false statements to the IRS and lying to federal agents. On September 13, he pleaded guilty to three counts of wire fraud, money laundering, and adviser fraud as part of a $50 million fraud and faces 20 additional counts and charges by the SEC.
1. In general, how did Starr perpetrate this fraud?Â
2. What â€œred flagsâ€ should have been recognized by alert investors?
3. Read the criminal complaint at http://www.nypost.com/r/nypost/2010/05/27/news/media/Starr,%20Kenneth%20and%20Stein,%20Andrew%20Complaint.pdf. Based on the complaint and the articles, can you figure out who any of the personalities are in terms of their specific-numbers as Associates or Clients? What purpose did the Wind River LLC account serve and how much money went through this account? Why are the amounts in the complaint and the pleading different?
4. Based on the criminal complain, how long did this fraud last and how does that compare with the average length of time for most similar types of schemes? (Hint: Go to the Association for Certified Fraud Examiners website to obtain the average length.) What types of charges (20 additional charges) do you think he faces with the SEC?
Barney, L. (2010). ‘Mini Madoff’ Starr Pleads Guilty to $50 Million Fraud, OnWallStreet.com, September 13 (Retrievable at http://www.onwallstreet.com/news/starr-madoff-2668709-1.html) Â
Southern District of New York, (2010). The U.S. versus Kenneth Starr and Andrew Stein (18 U.S.C. 1001, 1343 & 1956; 15 U.S.C. 80b-6 & 80b-17; 26 U.S.C. 7206 (1), May 26 (Retrievable at http://www.nypost.com/r/nypost/2010/05/27/news/media/Starr,%20Kenneth%20and%20Stein,%20Andrew%20Complaint.pdf)
Weiss, M., Â L. Cartwright, and B. Golding. (2010) Manhattan Financial Adviser to Celebs is Charged with Scamming Clients, New York Post, May 28 (Retrievable at http://www.nypost.com/p/news/local/nyc_financial_adviser_to_celebrities_DXslLxEwDlkAkxcooYs4pN#ixzz0zET4uSO5)