Bankrupt Firm’s Former Chief Faces Charges of Fraud
The former head of bankrupt Common Sense Capital Corp. on Friday was charged in a three-count federal grand jury indictment with fraud and conspiracy in connection with the sale of limited partnership interests in an uptown office building.
Lawrence J. Brophy was charged with mail fraud, conspiracy and aiding and abetting for allegedly diverting investor funds in a limited partnership that purchased an office building at 2131 3rd Ave.
Common Sense Capital raised $321,900 from the sale of fractionalized trust deed interests to renovate the building, which had been purchased by a limited partnership operated by Common Sense Capital for $1.2 million.
Investors were promised after-tax returns on their investments of 148% after 3 1/2 years, according to the indictment.
Contrary to Brophy’s claims, Common Sense Capital was insolvent and could not meet its obligations without raising additional investors’ funds, according to the indictment. In total, Common Sense Capital raised about $7.8 million in real estate partnership funds from hundreds of investors.
Brophy and former corporate secretary Daniel L. Pulvers were ordered to pay $500,000 in punitive damages after a trial last summer brought on behalf of 300 investors by attorney Michael Aguirre.
In March, the attorney who represented the bankrupt firm agreed to a $1.98-million out-of-court settlement with the plaintiffs in Aguirre’s suit.