Two going to prison for bilking investors
Cyprus Fund partners lost life savings of many
By Kymberli Hagelberg
Beacon Journal staff writer
Posted on Wed, Sep. 03, 2003
Almost exactly 4 years ago, hundreds of Ohio retirees learned their savings in Cyprus Funds had been wiped out and the man who operated the mutual fund had vanished.
On Wednesday, about a dozen of the bilked investors sat quietly in a federal courtroom in Cleveland as two of fund director Eric Bartoli's partners received prison time for their roles in the $34 million fraud.
Douglas R. Shisler, 59, of Doylestown was sentenced to 24 months in federal prison. Peter J. Esposito Jr., 48, of Middleburg Heights will serve 21 months. The men have been ordered to repay $8 million and $6 million, respectively.
Shisler and Esposito were charged with selling unregistered securities and filing false tax returns. In April, both pleaded guilty and pledged to cooperate with the investigation into remaining Cyprus Funds partners Bartoli and James Binge, a Jackson Township tax preparer who surrendered his securities license in 1999.
Chief U.S. District Judge Paul R. Matia could have sentenced the men to between 37 and 46 months in prison. The reduced penalty came at the recommendation of court receiver Michael Goldberg and the federal prosecutor's office.
`Nothing this court can do will improve anyone's lot in this case,'' Matia said before issuing his sentence.
Fraud also betrayal
``It's a vacation for these two,'' Josephine DiVincenzo of Euclid told the judge during her victim-impact statement.
DiVincenzo's mother, Dora Allen, died three years after learning she had lost her $125,000 life savings in the fraud.
Shirley Estes of Akron lost her retirement account raised from a 40-year career at Ameritech, as well as the savings of her 94-year-old father, who worked more than 42 years at Firestone.
``I was betrayed by a friend who never apologized,'' Estes said. ``They may go to prison, but we will live in financial prison for the rest of our lives.''
This year, Estes has fought breast cancer and cared for her husband, who has suffered a stroke.
``What do you do when you have $7 left over after bills and groceries?'' she asked. ``I don't know if I can afford the medical treatment I may need in the future.
``But I'd rather be in my position,'' she said, looking directly at Shisler and Esposito. ``I will live with a free conscience.''
Fund was ponzi scheme
Investigators say Bartoli, Shisler, Esposito and Binge operated Cyprus Funds from late 1995 until Aug. 27, 1999, when the SEC seized the Doylestown-based business and its assets.
The men raised $80 million, but only about $ 4 million was invested, investigators said.
The SEC describes the fund as a classic ponzi scheme, in which new sales are used to pay old investors. But most of the money was diverted into offshore accounts held by Bartoli and his partners or used to fund the men's sometimes bizarre lifestyles and business ventures.
Since the fund was seized, investors have watched auctioneers sell off South American art, antiques, herds of sheep, fields of soybeans, lavishly remodeled homes, jewelry, satellite-driven agricultural equipment and 1,500 acres of Ohio farmland.
Attorneys for Shisler and Esposito described the men as unwitting cogs in Bartoli's illegal machine.
``My only intention was to help these people,'' said Shisler, whose hair has gone from a mixture of gray and sandy brown to stark white since the fund failed. ``The last four years have been a total nightmare.''
Esposito attended a tax-reduction seminar where he met Eric Bartoli, said Esposito's attorney, Edward Bryan.
Bryan said Esposito graduated 411th in a high school class of 450 and was targeted by the men because he had a large clientele of senior citizens in his insurance business.
Esposito also lost the life savings of his family and his late father in the fraud, according to court records.
``I went to bed every night proud because I thought I had made a difference in the lives of those people,'' Esposito said. ``Today my father's funeral is still not paid for.''
In 2000, a federal judge in Miami found Bartoli liable for civil fraud. The Cyprus partners signed consent decrees -- the civil equivalent of a no-contest plea.
Bartoli and Binge have not been charged in criminal court.
The Cyprus Funds founder is living in Peru with his wife, Silvana, and two children, although he surrendered his passport more than a year ago after an arrest for civil contempt in New Hampshire.
So far, Goldberg has recouped $15 million in cash and property. Much of the success of the recovery effort and any potential charges against Bartoli and Binge can be traced to Shisler, Goldberg told the judge.
``Mr. Bartoli needed a man like Shisler, who was not bright enough, I'm sorry to say, to ask questions,'' Goldberg said.
Estes shed her anonymity to help sue a Florida bank in a class-action suit.
Lawyers reached a $5 million settlement in that case last week.
Case against KeyBank
Now a Stark County woman has stepped up to be one of two named plaintiffs in a lawsuit filed Aug. 25 against KeyBank.
The class-action lawsuit alleges employees of a Stark County bank branch and a Barberton branch assisted in opening Cyprus accounts that diverted funds.
Unlike many of the Ohio Cyprus investors, Tina Hollinger, 42, is a single mother of young children with years of sports teams, college tuitions and weddings ahead of her.
Binge introduced Hollinger to Cyprus Funds. He had filed each of her tax returns since she took her first job at age 17.
It was in that relationship that Binge offered to help her prepare for her future when she married 21 years ago.
Hollinger still can't bring herself to speak the actual dollars of her loss out loud. The money was every dime she and her husband, Terry, managed to put away in their marriage.
Tina remembers Terry often teasing about what would happen if their investment failed.
``He told Binge, `If you take my family's money, you're a dead man,' '' she recalled.
A little more than a year later, Terry died in an accident. All that was left was her husband's life insurance policy and a plan that would make the money grow, Binge promised the young widow.
Soon the insurance money also would be gone.
On Wednesday, Binge was still costing Hollinger money.
She now works two jobs, but took time off to see the men sentenced.
``It's never enough,'' Hollinger said through tears. ``It's never enough for what we lost.''
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Kymberli Hagelberg can be reached at 330-478-6000 (Ext. 14) or 1-800-478-5445 or khagelberg@thebeaconjournal.com |
