A con man once jailed for promoting a nonexistent “self-chilling” beer can pleaded guilty Tuesday to attempting to defraud California’s huge public employee pension fund of $100 million.
The scam was accidentally discovered and aborted by federal agents at a time when the swindler, 44-year-old Marshall A. Zolp, was under investigation for more traditional stock manipulation while on parole in a halfway house in La Jolla.
The pension fund scheme would have involved the payment of $10 million in kickbacks to offshore bank accounts held by unidentified co-conspirators, including a former trustee of the California Public Employee Retirement System (CalPERS), prosecutors said.
The guilty plea comes as CalPERS has been fighting an attempt by Gov. Pete Wilson to tap the fund for $1.6 billion to help close the state’s budget gap and to replace its 13-member independent board of trustees with one more beholden to the governor.
“Asset-laden pension funds, such as the California fund on which Zolp fixed his sights, have become ripe targets in an age of burgeoning white-collar crime,” said Michael Chertoff, the U.S. attorney in Newark, N.J., who brought the charges against Zolp.
“Embezzlers and swindlers today would give the same reason for looting pension funds as Willie Sutton gave for robbing banks: ‘Because that’s where the money is,’ ” Chertoff added.
Kayla Gillan, assistant general counsel of CalPERS, said the $62.4-billion pension fund--the nation’s largest such fund for public employees--has searched its records and can find no evidence of contact between Zolp and CalPERS officials.
“There was apparently a contact between Mr. Zolp and the former CalPERS trustee,” Gillan said, citing information given to CalPERS officials during questioning by FBI agents.
But she declined to identify the former trustee other than to say he was a political appointee who left the board more than a year ago. The alleged contact, she added, took place “after he was no longer a trustee.”
Gillan said that four CalPERS officials were interviewed by FBI agents in December and January and that the fund is cooperating with the ongoing investigation.
Zolp, who was sentenced to 12 years in federal prison for the self-chilling can scam in 1987, was paroled to the La Jolla halfway house in April, 1990.
Federal strike force prosecutor Kimberly McFadden called the smooth-talking Zolp “a classic recidivist” who “doesn’t know how to stay within the limits of the law.”
Zolp was barred by the Securities and Exchange Commission from working in the securities business after being implicated in at least seven major swindles during the 1980s, but he skirted the ban in his latest schemes by adopting the alias “Alex Seagrove,” prosecutors said.
In this too Zolp was acting true to form. A prosecutor in 1987 said in court that Zolp “changes identities as easily as other people change their clothes.”
In his latest schemes--including the attempt to defraud CalPERS--Zolp was the creator and promoter of what he described as an entirely new financial instrument he called the “Gross Revenue Investment Dividend,” or GRID.
To market the GRIDs to the public, the information to which he pleaded guilty as charged, Zolp created a prospectus for a company called Kovac Securities Inc. that neither disclosed his participation or his past troubles with the law.
Zolp also orchestrated a scheme to manipulate the shares of California Cola Distributing Co. to help finance the GRID scheme, the prosecutors said.
The unidentified former trustee was to have arranged to have CalPERS invest $100 million in GRIDs in return for a 10% kickback, Zolp told U.S. District Judge Alfred Lechner on Tuesday.
“With this plea, Marshall Zolp becomes a twice-convicted racketeer, whose latest crime is especially grievous, because Zolp committed the offense while on parole from his earlier (racketeering) conviction,” Chertoff said.
Zolp’s guilty plea to the new charges came in a plea bargain Tuesday. The agreement was an attempt to win leniency because he could be sentenced to up to 20 years in prison and $250,000 in fines.