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In December, Steven Pagartanis pleaded guilty to conspiracy to commit mail and wire fraud stemming from an 18-year scheme in which he convinced more than a dozen clients — mostly older women — to invest in two publicly traded companies, only to launder the invested money through a series of shell companies and private accounts that he controlled.
Pagartanis used some of the money he collected to pay out promised returns to earlier clients in what authorities described as a Ponzi-like scheme.Other funds went to bankroll personal expenses, including massages, jewelry, clothing, airline tickets and cigars. He also channeled hundreds of thousands of dollars to his wife's failing pet store, which was losing between $7,000 and $8,000 a month, according to a U.S. attorney's sentencing memo.
Pagartanis, who was based in East Setauket, N.Y. and was most recently affiliated with Lombard Securities, a registered broker-dealer, received his sentence earlier this month. In addition to 170 months of jail time, Pagartanis was ordered to repay more than $6.5 million in restitution.
"Today's sentence is a well-deserved reckoning for Pagartanis, who preyed on elderly investors, many of whom trusted him with their life savings, for nearly two decades," U.S. attorney Richard Donoghue said in a statement.
An attorney for Pagartanis did not immediately respond to a request for comment.
According to the Justice Department, from early 2000 through March 2018, Pagartanis raised more than $13 million from at least 17 investors, who suffered total losses of more than $9 million.
Pagartanis allegedly told his clients that he was placing their money in one of two legitimate investments — Genesis Land Development or Sonesta International Hotels — and promised fixed annual returns of as much as 8%. He induced his clients to sell their existing positions in mutual funds, annuities and/or retirement accounts and turn the money over to him, saying it would then be invested either in common stock of those companies or in investments similar to bonds or fixed-income instruments.
"The defendant frequently claimed that such investments were tax free, tax deferred or otherwise suitable for retirement purposes," Donoghue wrote in the sentencing memo.
Instead, Pagartanis transferred the money into secret accounts solely controlled by him. In an effort to conceal the tax liabilities that his victims incurred, Pagartanis, with the aid of a CPA, forged tax filings, 1099 forms and other documents.
Pagartanis' choice of victims — elderly women, many of whom had lost a spouse or other family member — made for easy marks, according to Donoghue.
"In all instances, the victims were not financially sophisticated and trusted the defendant," he wrote. "Each stressed to the defendant that they wanted their money in safe, secure and conservative investment vehicles — many had specific plans for the money and none were chasing a high rate of return."
The scheme started to unravel when investors began complaining that they were no longer receiving the payments that Pagartanis had promised. He was fired by Lombard in March 2018, and barred from the industry by FINRA the following month. The SEC filed a civil complaint against Pagartanis in May, and the criminal charges were filed in federal court in New York in July.
