Investor lived dual life on plundered cash
samsung1
Ohio
For four years, John Orecchio spent part of his life as a well-respected banker, husband and devoted father of three young children living in a two-story house with white pillars on a tree-lined Arlington Heights street.
The rest of the time, court records show, he posed as a high-rolling millionaire who drove a Bentley, collected thoroughbred racehorses and traveled on private jets to Las Vegas and tropical islands with his young fiancee, a former dancer whom he met during frequent visits to a Detroit strip club.
His dual life was supported by a seemingly bottomless pool of cash plundered from union pension funds. A University of Notre Dame graduate who earned an MBA from Northwestern University's Kellogg School of Management, Orecchio pleaded guilty in February to embezzling millions of dollars from a handful of Michigan pension funds through his investment company, Chicago-based AA Capital Partners. He is slated to be sentenced in federal court Thursday.
In all, Orecchio, 44, stole more than $24 million from six unions to prop up his charade, which devastated the lives of colleagues, clients, family and friends, court records and interviews show.
He might have gotten away with it if, in 2006, investigators from the U.S. Securities and Exchange Commission hadn't started poring over the books of AA Capital Partners, a boutique investment firm catering to union pensions that was founded by Orecchio and a partner in 2002.
Now the investment banker is facing more than nine years in prison and tens of millions of dollars in fines and restitution payments. He lost his wife and all his posh possessions, with the psychic toll leading to a suicide attempt and brief hospitalization, court records show.
His story adds to a history of abuse in a corner of the U.S. retirement system where 17 million blue-collar workers and tradesmen have more than $675 billion set aside in multi-employer union pension plans.
"Anyone who would steal money from hardworking people deserves the full ramifications of the law," said Rich Davis, the newly elected president of the Michigan Regional Council of Carpenters, one of the pensions Orecchio stole from. "This has had an impact on people's retirement."
Under federal sentencing guidelines, Orecchio could have received a maximum of 25 years in prison for one count of wire fraud and one count of stealing from an employee benefit plan. But he is expected to receive a much lighter sentence Thursday in large part for cooperating with ongoing federal corruption investigations into union officials in Detroit.
Documents filed in federal court point out that Orecchio placed more than 150 phone calls to union officials that federal authorities recorded and that he wore a wire during 20 in-person meetings with union representatives.
His cooperation helped lead to the indictment of Julian "Roxy" Jewett, a Las Vegas resident who pleaded guilty in January for giving kickbacks to a former trustee of the Michigan Regional Council of Carpenters in exchange for requiring Orecchio to hire Jewett's firm as a consultant on a deal to develop a Hard Rock casino in Biloxi, Miss. Jewett received a year of probation.
The former trustee, Walter Ralph Mabry, had already been found guilty and sentenced to two years in federal prison in 2006 for receiving about $120,000 in free union work on his home in Grosse Pointe Park, Mich. No charges have been filed in connection to the Orecchio case.
John Tesija, an attorney representing two pension funds for Michigan carpenters that together invested $96 million with AA Capital, said union officials have been cooperating with authorities.
"Both funds have strongly supported prosecuting Orecchio and are cooperating with a number of federal agencies," he said.
Orecchio has said he tried to bribe former Detroit Mayor Kwame Kilpatrick -- who went to prison for obstruction of justice in 2008 -- in return for a chance to pitch the Detroit Police and Fire Pension Funds on investing with AA Capital, according to FBI reports quoted in news stories out of Detroit late last year.
Reports filed by receiver Scott Porterfield, who was appointed by a federal judge to assume control of AA Capital in 2006, say Orecchio spent about $1 million in pension funds to make political contributions and donations to politically connected charities in Michigan.
Pleadings filed by Orecchio's attorney, William Zeigelmueller, say Orecchio's crimes were sparked by his "wining and dining" of union officials, which eventually "spiraled out of control." Zeigelmueller declined to comment for this story.
Indeed, court documents show that Orecchio spent lavishly on travel and entertainment during his four-year scheme. Orecchio used $2.5 million from the pension funds for sporting events, including luxury box seats at Bears, Blackhawks and Detroit Red Wings games; another $1.5 million went to high-end hotels, first-class plane tickets and "client events."
Millwrights Local No. 1102, another union with a pension fund that was bilked by Orecchio, claims in a 2007 lawsuit that an unnamed senior vice president of Merrill Lynch -- hired by the pension fund as an investment adviser -- recommended that the union invest with AA Capital while failing to disclose that the executive had received lavish gifts from Orecchio. Merrill Lynch's attorneys vehemently deny the allegations, saying the union sought out AA Capital on its own.
Yet the bulk of the money Orecchio embezzled went toward stoking his millionaire image, according to court records. Along the way, he took up with a 27-year-old dancer who worked at Crazy Horse Detroit, a strip club where Orecchio took clients.
Although he never owned a stake in the club, court records show that Orecchio used $180,000 in pension money to rehab the establishment in exchange for making the dancer a manager. Orecchio eventually proposed to her and bought her a horse farm in Michigan and about $1 million worth of jewelry.
He also bought property in Las Vegas and Michigan, including a home for the dancer's mother, all while supporting his wife and three children in Arlington Heights, records show.
Orecchio embezzled the money under the noses of his partner, Paul Oliver, who owned half of AA Capital, and Mary Elizabeth Stevens, the firm's CFO, who approved millions of dollars' worth of expense reports and made wire transfers to accounts controlled by Orecchio without proper documentation, court records show.
Orecchio, Oliver and Stevens were all sued by either the SEC or the Department of Labor or both and have been barred from overseeing retirement funds or publicly traded companies. Orecchio, meanwhile, was slapped with a $50 million civil judgment in a case filed by the Labor Department.
Although the SEC has declined to say what triggered its investigation, examiners quickly found that AA Capital had $7 million in expenses and just $2 million in revenue and that about $5 million had been misappropriated. The agency then filed suit in federal court to remove AA Capital's managers and appoint a receiver, who has spent years and millions of dollars untangling the fraud.
Of the $194 million invested with AA Capital by union pension funds, Porterfield so far has recovered about $100 million by selling assets and collecting on fidelity bonds taken out on investment funds managed by the firm.
http://www.chicagobreakingnews.com/2010/…
June 16, 2010
The rest of the time, court records show, he posed as a high-rolling millionaire who drove a Bentley, collected thoroughbred racehorses and traveled on private jets to Las Vegas and tropical islands with his young fiancee, a former dancer whom he met during frequent visits to a Detroit strip club.
His dual life was supported by a seemingly bottomless pool of cash plundered from union pension funds. A University of Notre Dame graduate who earned an MBA from Northwestern University's Kellogg School of Management, Orecchio pleaded guilty in February to embezzling millions of dollars from a handful of Michigan pension funds through his investment company, Chicago-based AA Capital Partners. He is slated to be sentenced in federal court Thursday.
In all, Orecchio, 44, stole more than $24 million from six unions to prop up his charade, which devastated the lives of colleagues, clients, family and friends, court records and interviews show.
He might have gotten away with it if, in 2006, investigators from the U.S. Securities and Exchange Commission hadn't started poring over the books of AA Capital Partners, a boutique investment firm catering to union pensions that was founded by Orecchio and a partner in 2002.
Now the investment banker is facing more than nine years in prison and tens of millions of dollars in fines and restitution payments. He lost his wife and all his posh possessions, with the psychic toll leading to a suicide attempt and brief hospitalization, court records show.
His story adds to a history of abuse in a corner of the U.S. retirement system where 17 million blue-collar workers and tradesmen have more than $675 billion set aside in multi-employer union pension plans.
"Anyone who would steal money from hardworking people deserves the full ramifications of the law," said Rich Davis, the newly elected president of the Michigan Regional Council of Carpenters, one of the pensions Orecchio stole from. "This has had an impact on people's retirement."
Under federal sentencing guidelines, Orecchio could have received a maximum of 25 years in prison for one count of wire fraud and one count of stealing from an employee benefit plan. But he is expected to receive a much lighter sentence Thursday in large part for cooperating with ongoing federal corruption investigations into union officials in Detroit.
Documents filed in federal court point out that Orecchio placed more than 150 phone calls to union officials that federal authorities recorded and that he wore a wire during 20 in-person meetings with union representatives.
His cooperation helped lead to the indictment of Julian "Roxy" Jewett, a Las Vegas resident who pleaded guilty in January for giving kickbacks to a former trustee of the Michigan Regional Council of Carpenters in exchange for requiring Orecchio to hire Jewett's firm as a consultant on a deal to develop a Hard Rock casino in Biloxi, Miss. Jewett received a year of probation.
The former trustee, Walter Ralph Mabry, had already been found guilty and sentenced to two years in federal prison in 2006 for receiving about $120,000 in free union work on his home in Grosse Pointe Park, Mich. No charges have been filed in connection to the Orecchio case.
John Tesija, an attorney representing two pension funds for Michigan carpenters that together invested $96 million with AA Capital, said union officials have been cooperating with authorities.
"Both funds have strongly supported prosecuting Orecchio and are cooperating with a number of federal agencies," he said.
Orecchio has said he tried to bribe former Detroit Mayor Kwame Kilpatrick -- who went to prison for obstruction of justice in 2008 -- in return for a chance to pitch the Detroit Police and Fire Pension Funds on investing with AA Capital, according to FBI reports quoted in news stories out of Detroit late last year.
Reports filed by receiver Scott Porterfield, who was appointed by a federal judge to assume control of AA Capital in 2006, say Orecchio spent about $1 million in pension funds to make political contributions and donations to politically connected charities in Michigan.
Pleadings filed by Orecchio's attorney, William Zeigelmueller, say Orecchio's crimes were sparked by his "wining and dining" of union officials, which eventually "spiraled out of control." Zeigelmueller declined to comment for this story.
Indeed, court documents show that Orecchio spent lavishly on travel and entertainment during his four-year scheme. Orecchio used $2.5 million from the pension funds for sporting events, including luxury box seats at Bears, Blackhawks and Detroit Red Wings games; another $1.5 million went to high-end hotels, first-class plane tickets and "client events."
Millwrights Local No. 1102, another union with a pension fund that was bilked by Orecchio, claims in a 2007 lawsuit that an unnamed senior vice president of Merrill Lynch -- hired by the pension fund as an investment adviser -- recommended that the union invest with AA Capital while failing to disclose that the executive had received lavish gifts from Orecchio. Merrill Lynch's attorneys vehemently deny the allegations, saying the union sought out AA Capital on its own.
Yet the bulk of the money Orecchio embezzled went toward stoking his millionaire image, according to court records. Along the way, he took up with a 27-year-old dancer who worked at Crazy Horse Detroit, a strip club where Orecchio took clients.
Although he never owned a stake in the club, court records show that Orecchio used $180,000 in pension money to rehab the establishment in exchange for making the dancer a manager. Orecchio eventually proposed to her and bought her a horse farm in Michigan and about $1 million worth of jewelry.
He also bought property in Las Vegas and Michigan, including a home for the dancer's mother, all while supporting his wife and three children in Arlington Heights, records show.
Orecchio embezzled the money under the noses of his partner, Paul Oliver, who owned half of AA Capital, and Mary Elizabeth Stevens, the firm's CFO, who approved millions of dollars' worth of expense reports and made wire transfers to accounts controlled by Orecchio without proper documentation, court records show.
Orecchio, Oliver and Stevens were all sued by either the SEC or the Department of Labor or both and have been barred from overseeing retirement funds or publicly traded companies. Orecchio, meanwhile, was slapped with a $50 million civil judgment in a case filed by the Labor Department.
Although the SEC has declined to say what triggered its investigation, examiners quickly found that AA Capital had $7 million in expenses and just $2 million in revenue and that about $5 million had been misappropriated. The agency then filed suit in federal court to remove AA Capital's managers and appoint a receiver, who has spent years and millions of dollars untangling the fraud.
Of the $194 million invested with AA Capital by union pension funds, Porterfield so far has recovered about $100 million by selling assets and collecting on fidelity bonds taken out on investment funds managed by the firm.
http://www.chicagobreakingnews.com/2010/…
June 16, 2010
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10 comments
"Up the long ladder and down the short rope!"
stealing from retirees is just plain fucked up.
I would think that the kind of rampant theft & fraud involved in the OP is hard to prevent. This guy just got his hands on money that wasn't even his through a variety of schemes and was eventually caught.
The "Enron loophole" from 2000 exempted most over-the-counter energy trades & trading on electronic energy commodity markets from govt. regulation. The same bill allowed for the creation of a new kind of derivative security, the single-stock future, which had been prohibited since 1982. In 2008, the "Enron Loophole" was closed, but only over the veto of GWB. The "Enron loophole" was blamed, in part, for allowing speculators to run up the cost of fuel in 2008 by operating outside federal regulation.
The same law from 2000 made most over-the-counter derivatives transactions between "sophisticated parties" unregulated as futures under the Commodity Exchange Act or as securities under federal securities laws. The same law's treatment of credit default swaps (CDSs) was extremely poor...with the law broadly excluding them from regulation.
WorldCom filed for Chapter 11 bankruptcy protection in 2002, and only came out of bankruptcy in 2004 after getting a a no-bid contract by the Bush Regime in 2003 to build a cellular telephone network in Iraq. In 2005, Verizon Communications bought them out.
Enron filed for bankruptcy in late 2001. They prospered from a decade-long effort to persuade lawmakers to deregulate electricity markets and from strong ties to the Bush Regime. The passage of the Sarbanes-Oxley Act in mid-2002 addressed much of Enron's perceived corporate governance failings. It established the Public Company Accounting Oversight Board to develop standards for the preparation of audit reports; the restriction of public accounting firms from providing any non-auditing services when auditing; provisions for the independence of audit committee members; executives being required to sign off on financial reports and relinquishment of certain executives' bonuses in case of financial restatements; and expanded financial disclosure of firms' relationships with unconsolidated entities. In 2003, the New York Stock Exchange implemented a new governance proposal, which said that all firms must have a majority of independent directors, that all compensation committees, nominating committees and audit committees shall consist of independent directors, that all audit committee members should be financially literate (duh), and that at least one member of any audit committee was required to have accounting or related financial management expertise.
I highly recommend the documentary, "Enron: The Smartest Guys in the Room".
Lehman Brothers was taken down in 2008 by the sub-prime mortgage crisis & naked short selling. Fannie Mae & Freddie Mac were placed into conservatorship of the Federal Housing Finance Agency in 2008 because of, in part, the subprime mortgage crisis, which they really had little to do with starting in the first place.
Citigroup suffered huge losses during the global financial crisis of 2008 due to heavy exposure to troubled mortgages in the form of collateralized debt obligation (CDOs) & their previous involvement in the troubles with Enron & WorldCom, and they were bailed out by the U.S. govt.. As of 2009, the U.S. govt. had a 36% equity stake in the company for the cost of $25 Billion. That stake is now only 27% after a sale $21 Billion of common shares & equity.
The Federal Reserve Bank got control of roughly 80% of the massive equity of AIG after the company got into trouble with CDSs & CDOs in 2008.