Vermilion Man Charged with Operating Financial Schemes That Resulted in Nearly 100 Clients Losing
A Vermilion man was charged with financial crimes that resulted in nearly 100 clients losing more than
The five-count information details two schemes by Zakarian–one to defraud investment clients (many of whom were also clients of his tax-preparation business), another to defraud clients whose payroll taxes he handled through a company known as Ben Franklin Payroll Service.
Many of the payroll tax victims were churches, charities, and other non-profit organizations that Zakarian lured as clients through purported grants from charity he claimed to operate. The information further details Zakarian's falsification of his tax returns to conceal his fraudulently generated income from the investment scheme.
"This defendant is accused of taking advantage of trust of dozens of clients, which ranged from homeless shelters and nursery schools to retirees and those with disabilities,"
"Investment fraud schemes are often described as a house of cards. The underlying structure can fall apart at any time and expose the individuals responsible," said
The information filed in
The Investment Scheme
Zakarian misled clients to believe their funds would be placed in safe, guaranteed-return investments when, in fact, he diverted the funds to pay personal and business expenses and invested in risky investments for which he had a consistent history of incurring large losses.
Zakarian recruited 25 investment clients, often targeting tax preparation clients who he knew to have available funds and to be vulnerable to his pitch through their lack of financial sophistication and/or prior relationship of trust in him.
While some received a return on part or all of their investment, 23 clients incurred combined out-of-pocket losses of more than
A number of clients were retired, out of work, or nearing retirement. Most invested through Zakarian by moving their money from traditional, relatively safe, and dependable stocks, bonds, and mutual funds.
In one case, Zakarian convinced a recently retired client to pay an early withdrawal penalty to move money from a certificate of deposit purchased upon retirement. He induced another client to redeem a life insurance annuity to generate investment funds and talked her out of using the money to pay off her home mortgage or car loans.
Until mid-2009, Zakarian obtained use of clients funds primarily by having them place their investments with companies offering self-directed IRA services and then having those companies transfer the funds to Zakarian as investments in promissory notes he issued. Zakarian initially issued the notes personally, as
The Payroll Tax Scheme
Zakarian began his separate payroll tax scheme in 2010 that continued through
He induced clients to retain Ben Franklin Payroll Service, which he owned and operated, leading them to believe the company would and did file the client's required employment tax returns and reports and pay the clients' federal, state, and local tax obligations.
The funds should have been forwarded to various taxing authorities to pay the income taxes of his clients' employees. In reality, he failed to file many of the returns and diverted substantial portions of the clients' funds to pay his own personal and business expenses and invest in highly leveraged, risky investments with a consistent history of sustaining large losses.
Zakarian devised the scheme in hopes of raising money to be able to pay victims of his investment fraud scheme described above. He hoped to generate large, quick profits, which he would use to cover his operating expenses, repay his investment clients, pay his clients' employment taxes and have money left over; instead, he consistently lost money.
He attempted to solicit for-profit clients by offering services well below market rates and below his own operating costs, such as a rate of
Zakarian began marketing Ben Franklin Payroll Service as being affiliated with
To make the grant process appear legitimate, the application required the applicant to submit a one- or two-page narrative history and mission statement, a copy of the
Rather than forwarding the money withdrawn to from his clients' accounts directly to taxing authorities, Zakarian instructed his employees to transfer the tax funds to a Ben Franklin Payroll Service operating account. Clients were sent false quarterly employment tax returns and payroll summaries, giving the false impression that their payroll taxes were being properly handled.
Zakarian also filed false federal income returns for the years 2006 through 2009, failing to report the income he received from the investment scheme. He filed the 2006 through 2008 returns deliquently in
If convicted, the defendant's sentences will be determined by the court after review of the federal sentencing guidelines and factors unique to each case, including the defendant's prior criminal record, if any, the defendant's role in the offenses and the characteristics of the violations.
This case is being prosecuted by Assistant U.S. Attorneys
An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government's burden to prove guilt beyond a reasonable doubt.
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