Stamford Man Sentenced for $17 Million Investor Fraud

STAMFORD, CT—City man Carlons Cabot, 54, was sentenced to 10 years in prison by a federal judge after he was charged with defrauding about $17 million from elderly investors.

Cabot ran CAbot Investment Properties LLC and defrauded hundreds of investors, according to the U.S. Attorney Southern District of New York office.

Fraud was concealed with false financial statements.

“Carlton Cabot took $17 million from vulnerable investors and spent it lavishly on himself, and then lied to cover it up," said U.S. Attorney Preet Bharara. "The victims, many of whom were in their 70s and 80s, were simply looking for a steady income stream to sustain them in their retirement. Now, instead of economic safety and security, they are faced with financial ruin."

Cabot plead guilty and was additionally sentenced to pay $17 million in restitution and forfeiture and three years of supervised release.

More from the U.S. Attorney's office:

From 2003 through 2012, CIP – which was controlled by CABOT – sponsored and oversaw approximately 18 so-called tenants-in-common (“TIC”) securities offerings to investors located all over the United States (collectively, the “TIC Investments” and the “TIC Investors”). A TIC investment is a real estate investment in which investors collectively own a piece of commercial real estate and are entitled to receive a portion of the rental income from the property.

From 2008 through 2012, CABOT engaged in a scheme to defraud the TIC Investors by misappropriating funds belonging to the TIC Investments and concealing his misappropriations by knowingly providing false and misleading financial reports and other information to the TIC Investors.
According to the representations in the offering prospectuses for the TIC Investments, CIP was allowed to collect only “excess” rental income from the TIC Investments – i.e., any additional money left over after the TIC Investments had paid the operating expenses for the properties and the disbursements due to the TIC Investors. Despite these representations, CABOT repeatedly transferred money out of bank accounts belonging to the TIC Investments and into CIP bank accounts that he controlled (the “CIP Operating Accounts”) before these funds could be used to pay for operating expenses and disbursements to the TIC Investors.

CABOT then used these funds to pay for unauthorized purposes without the knowledge or authorization of the TIC Investors, including: (1) to cover the operating expenses and investor distributions of other TIC Investments that had no available funds; (2) to pay for millions of dollars of personal expenses, including expensive cars, rental apartments, and private school tuition; and (3) to pay for CIP business expenses, including an approximately $1,125,651 civil settlement to certain TIC Investors who had sued CABOT and others.

To conceal the misappropriation of TIC Investment funds from the TIC Investors, CABOT and his co-defendant, Timothy J. Kroll, CIP’s chief operating officer, provided false and misleading financial reports to the TIC Investors that intentionally hid the fact that CIP owed large sums of money to the TIC Investments.
By the end of 2012, when CIP ceased its day-to-day operations, CIP and its principals, CABOT and Kroll, owed approximately $17 million to the TIC Investments, which has never been repaid.

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