Not Just Stars Hurt in Advisor’s Alleged Scam
In a generally undistinguished academic career, Dana Giacchetto excelled in one course during his brief time in Harvard University’s extension program: “Fiction Skills Workshop.”
Storytelling seems to be an innate talent for the one-time celebrity money manager, now facing up to 20 years in federal prison for allegedly defrauding clients. Giacchetto earned an A- in the course, according to court records, in contrast with the mostly Cs he earned during the early part of his academic career at the University of Massachusetts.
For the people who kept buying into his tales, Giacchetto’s talent has been a curse, however. While many high-profile clients such as Michael Ovitz, Matt Damon and Leonardo DiCaprio apparently got their money out with the help of high-priced lawyers and accountants, smaller investors often saw their savings depleted.
People such as New York artists Robert and Cara Wood Ginder, a couple who said they were friends of Giacchetto for more than a decade, lost much of their $600,000 retirement nest egg and college fund for their 3-year-old daughter.
“I am not an experienced investor, and rely on Giacchetto and Cassandra [Group] to manage those assets that comprise all of my life savings,” said Robert Ginder in an affidavit on file with the SEC.
The spotlight so far has followed Giacchetto’s star clients--which according to SEC documents also included musician Bob Dylan; Steven Spielberg’s wife, Kate Capshaw; and art gallery owner Arne Glimcher--but many of his victims were lesser known. The experiences of the Ginders and others are laid out in an array of letters, affidavits, tape recordings and e-mails showing why Giacchetto is accused of using his charms to take advantage of friends and unsophisticated artists. He confused and misled them as he allegedly shifted $20 million of their funds through accounts to pay for his lifestyle and cover his tracks. More than $6 million of that amount is still missing, according to federal authorities, who suspect the total might be higher.
Giacchetto, 37, once dubbed the “rock-and-roll money manager” by GQ magazine, was arrested last week, on three felony counts of defrauding clients, committing investment advisory fraud and lying to the Securities and Exchange Commission through his investment company, Cassandra Group. He is free on a $1-million bond secured in part by his parents’ $500,000 home in Medford, Mass. Giacchetto’s lawyer, Robert Levander, has so far declined to answer questions about the case.
The Ginders’ nest egg primarily was money from the sale of a TriBeCa loft. It took Ginder and his wife 10 years to organize tenants to buy their 10-unit apartment building before closing the deal in 1994 and later converting the building into a co-op. Soaring New York real estate prices gave them a windfall and the opportunity to sell the home, move to New Hamburg in the Hudson River Valley and invest the money for their future.
“I considered using some of the proceeds from that sale to purchase my family’s present home in New Hamburg in an all-cash transaction,” Ginder said in the affidavit. “However, Giacchetto advised me to finance the New Hamburg house with a mortgage and deposit the remaining funds in the [brokerage] account.” Ginder said the only withdrawals he authorized from that account were to pay the mortgage, home improvements and repairs.
In March, Ginder noticed that the value of his account set up by Giacchetto with brokerage Brown & Co. had “substantially declined” in part due to a $75,000 check written on Feb. 15 that he never received.
Lawyer David Comarow, who is Cara Ginder’s stepfather and the couple’s representative, said that when Robert Ginder called Brown & Co. to discuss the matter, he unexpectedly received a call back from Giacchetto to reassure him. On March 22, Ginder said in his affidavit, he was told by Giacchetto that he used the money to buy bonds.
SEC records state that the amount was transferred to Giacchetto’s Cassandra account.
“They wanted to put some money away for their young baby,” Comarow said. “They trusted Giacchetto, even as he was coming down. [Robert] would call Giacchetto, and get off the phone feeling like everything was OK. Giacchetto had an answer for everything.”
There was more bad news. Ginder was surprised to learn he had a 10,000-share investment in the small entertainment company Paradise Music & Entertainment--where Giacchetto was a paid consultant-- even though he had specifically told Giacchetto he did not want to buy the securities for his account when offered them at $4.25 a share. Ginder discovered that the shares were bought for $5.80 each and had fallen to $2.63 by the end of February.
Ginder in his affidavit said Giacchetto never got his approval for the investment. When asked to explain, Giacchetto said he bought the shares on the open market “because he believed those would be a good investment,” Ginder said. “He did not tell me anything else about those securities,” such as how risky they are.”
SEC investigators showed Ginder two checks--for $75,000 and $121,850--that appeared to have been drawn from his brokerage account and deposited into an account for Cassandra. “Although both checks are payable to me, the signatures on the back of both checks are not mine,” Ginder said in his affidavit.
The transactions were audiotaped--a routine recording of calls done by Brown, similar to many brokerages, to confirm that they are following clients’ directions. On the 20 minutes of tapes, a voice identified as Giacchetto’s matter-of-factly requests funds from a series of accounts, in amounts up to $250,000. The calls come well after he had been served with search warrants and a little more than two weeks before he would be arrested, and show Giacchetto routinely fished around to find accounts with enough money available for his needs.
“It’s Dana Giacchetto,” the voice said in a March 16 call. “I have two check requests.”
His brokerage house contact replies, “OK, go for it.”
Giacchetto gives Ginder’s account number and requests a check for $121,850. The transaction is over in moments.
Another time, a receptionist said, “I have Dana Giacchetto, can you hold on?” Then Giacchetto said, “Hey, Joe, how are you?” After a “Fine,” he gives an account number, requests a check for $200,000 and asks, “What’s available in this account?”
“Let me check,” Joe said, then reports, “$545,377.”
“So they’re covered,” Giacchetto replies, requesting that the check be sent to him via Federal Express.
Another time, he asks for $50,000 but is told there’s only $23,000 “free cash.” He replies, “that’s not going to do it.”
Yet another time, he asks first how much cash is free in the account. Told $90,979, he said, “that will be $75,000,” in a check to be sent directly to him.
Bates and Eller reported from Los Angeles. Lieberman reported from New York.
