Springfield Man Accused of $2 Million Fraud

A Westfield-based investment advisor was arrested Tuesday morning and charged with defrauding investors, including a New York City union pension fund, of more than $2 million to fund a lavish personal lifestyle.

Carlo Chiaese, 38, of Springfield, surrendered to FBI agents on accusations of defrauding investors in New Jersey and New York. Chiaese operated CGC Advisors, LLC, which the federal complaint said is located in Westfield, from 1999 to 2010.

Investigators say Chiaese raised more than $2.4 million from 2008 to 2010, telling investors that he favored a conservative strategy that wouldn't put their money at significant risk. The U.S. attorney's office said that a $1.71 million investment came from a pension fund for 850 current and former public sector union employees in New York City.

Investigators say he didn't invest the money, but instead used it to fund a lavish personal lifestyle.

Chiaese was released on $750,000 bond following a bail hearing Tuesday afternoon before a federal magistrate judge in Newark.

Chiaese is charged with sending false account statements and trade confirmations to investors to conceal his behavior. The criminal complaint said that Chiaese confessed the fraudulent actions to two friends on Sept. 18.

U.S. Attorney Paul Fishman has accused Chiaese of using $1.4 million of the money for various purchases. These include $800,000 in transfers to his wife and family members; $185,000 in cash withdrawals; $65,000 in mortgage payments; $38,000 in lease payments for a Porsche 911 Carrera, an Audi Q7 and a Land Rover; $75,000 for membership at two New Jersey country clubs; $23,000 in home audio equipment; $32,000 in landscaping; $16,000 in rugs; $25,000 in purchases at Hermes, Bergdorf Goodman, Saks Fifth Avenue and Salvatore Ferragamo; and $14,000 for hotel stays at the Ritz Carlton in Battery Park, the Ritz Carlton in St. Thomas, U.S. Virgin Islands and the Breakers in Palm Beach.

He is also charged with using $180,000 of the money to pay back other investors, including those in London, in what Fishman termed a "Ponzi-scheme fashion."

"As charged in the complaint, when Carlo Chiaese claimed to be making secure investments, he was really securing his own access to pricey diversions and ready cash," Fishman said in a prepared statement. "Although we see far too many of these schemes, we cannot become desensitized to them. Each such allegation shows that there are many out there who would steal from the unsuspecting; and we are committed to exposing their frauds for what they are."

Chiaese and his attorney declined to officially comment comment on the case following the hearing. His attorney stressed during the hearing that Chiaese voluntarily turned himself over to the Securities and Exchange Commission.

During the bail hearing, Chiaese wore a rumpled pink dress shirt and gray pants and remained handcuffed. Provisions of his bail included participatong in a drug treatment program and to avoid working in finance and other. The bond is guaranteed by five people and two family properties in Whippany and Warren Township.

Chiaese's attorney said that his sister, Claudia Alifano will be responsible for him while is he out on bail. His sister, uncle and girlfriend were present in the courtroom. The whereabouts of Chiaese's wife, who was mentioned in the US Attorney's statement, are not known. Chiaese's attorney said that he will also be caring for his young son while out on bail.

An office location for CGC Advisors, LLC in Westfield was not disclosed in the federal complaint. A Google search for the company reveals an address in Rockefeller Plaza in midtown Manhattan but none in Westfield. A website for the company is under construction. Chiaese does not disclose an office address on his two LinkedIn pages.

If convicted on the charges, Chiaese could face up to 20 years in federal prison and up to a $5 million fine.