Federal Agents Conduct Inquiry Into Possible Ponzi Scheme
Federal law-enforcement authorities are conducting what they call “a significant” tax and fraud investigation said to focus on a Ponzi scheme that may have bilked San Fernando Valley investors.
The investigation is being conducted by the Internal Revenue Service and the Los Angeles Strike Force of the U. S. Justice Department’s Organized Crime and Racketeering Section, according to Special Attorney Edwin J. Gale, who heads the strike force.
Gale disclosed the probe in a letter to a lawyer representing Edie D. Kelly, a 52-year-old Encino real estate broker sentenced in January to 10 days in jail and five years of probation for forging a trust deed (an IOU secured by real estate) in 1984.
Cooperation Discussed in Letter
Gale wrote the letter to inform Superior Court Judge Richard G. Kolostian of Kelly’s cooperation before the judge sentenced her. Citing a policy against discussing investigations, neither Gale nor an IRS spokeswoman would elaborate on the probe, and neither Kelly nor her lawyer, Brian S. Braff, could be reached for comment.
But informed sources outside law enforcement said the scheme involved one or two men who allegedly passed themselves off as loan sharks and persuaded investors to provide them with money for usurious lending, promising the investors a hefty profit.
For a while, one source said, the purported loan sharks paid out healthy returns. But, at some point, the men simply disappeared, the sources said, taking the investors’ loan capital with them.
The scheme allegedly occurred during 1983, according to two sources familiar with what happened. One reason things took so long to come to light may be the reluctance of investors to admit they were bilked while trying to profit from unlawfully high interest.
In his letter, Gale said Kelly had been a victim of the scheme. A copy of the letter is in Kelly’s court file, along with a probation report chronicling a probation officer’s interview of her.
This probation report says that, in 1980, burdened with debts, Kelly borrowed $30,000 from someone at 3% interest a week. The report says Kelly repaid that loan, and that her lender told her he knew many other small business people like Kelly who also needed capital.
According to the report, Kelly and Mary B. Rabellino gave Edie’s private lender $100,000 “to invest,” but the man disappeared with it.
A Longtime Friend
Rabellino, 67, was a longtime friend of Kelly’s who owned a commercial structure at 16614 Ventura Blvd. in Encino, and it was on this structure that Kelly, acting without Rabellino’s knowledge, forged a trust deed. Kelly also rented office space in the building.
Rabellino contends that her losses, because of Kelly, exceed $329,000. That includes a largely unpaid loan for $140,000 that Rabellino says she made to Kelly, and another $125,000 Rabellino says she lost when Kelly, acting as her real estate agent, failed to disclose an offer to buy the property. As a result, Rabellino says, she later had to sell the property for $125,000 less.
Rabellino is suing Kelly in Superior Court for fraud, breach of contract, breach of fiduciary obligations, conspiracy and negligence. Kelly is also being sued by Karen Anderson, an investor from Saratoga, Calif., who bought the forged trust deed for $45,000.
