Trustee Takes Over Irvine Firm Said to Have Bilked Investors
A Bankruptcy Court judge appointed a trustee Tuesday to sort through the wreckage of an Irvine investment company accused of bilking as much as $35 million from hundreds of investors nationwide, including high-profile athletes like former Los Angeles Rams running back Eric Dickerson.
DFJ Italia, which investors learned recently was being run by two felons, shut its doors Saturday amid accusations of fraud and theft.
Investors ranging from Orange County physicians to East Coast retirees say they were told their money would be used to buy precious metals and to profit from European currency trading. Dickerson, for instance, invested $100,000. Former Rams lineman Duval Love and his parents invested a total of $172,000.
But attorneys for some investors now believe that the money was squandered by managers and that DFJ was a Ponzi scheme, in which money raised from new investors was used to pay off earlier investors.
A group of five investors, including Dickerson and Love, filed claims Monday to force the company into Chapter 7 bankruptcy. On Tuesday, U.S. Bankruptcy Judge John E. Ryan approved their emergency request to appoint a trustee to take control of the company.
Steven J. Katzman, attorney for the investor group, said he hopes the trustee will be able to seize company records and search for remaining assets, but so far, none of the investors’ money has been located.
“There’s been a lot of finger-pointing going on,” Katzman said.
The FBI has interviewed former employees, a lawyer for one of the employees said. But FBI officials would not comment on whether an investigation is underway.
None of DFJ’s officers appeared at Tuesday’s hearing.
Investors say they were shocked to learn recently that two of DFJ’s leaders, Luigi DiFonzo and Angelo Ales, are convicted felons. Court records show both men served time in prison for fraud and other crimes.
Ales was convicted of filing false tax returns for the years 1993 to 1997, illegally receiving Social Security benefits and giving false testimony at a government hearing, court records show. In January, a federal appeals court upheld his 4 1/2-month prison sentence, which he told some investors he would soon begin serving. He could not be reached for comment.
DiFonzo, who lives in Laguna Niguel, pleaded guilty in 1978 to submitting false financial documents to the Securities and Exchange Commission in an effort to make his Chicago investment company appear more solvent, records show. DiFonzo also owed unpaid income taxes for several years in the mid-1970s and in 1980.
An attorney for DiFonzo declined to comment Tuesday.
Investors say in court documents that another DFJ manager, Ken Kuczway, promised them a 24% rate of return and lied about the company’s history and activities. Investors say in their court papers that Kuczway told them DFJ had been in operation for 70 years and had billions of dollars in assets.
An attorney for Kuczway said in Tuesday’s court hearing that his client supported the investors’ efforts to appoint a trustee.
As DFJ’s problems began to surface in recent months, Ales and DiFonzo began blaming each other, according to court records and interviews.
DiFonzo claims he left the company 18 months ago because of concerns over how it was being run, sources said. Ales has told investors that DiFonzo stole the company’s money, court papers show.
The men also battled in Orange County Superior Court last fall over control of DiFonzo’s $4-million Laguna Niguel home and other real estate assets in Orange County.
In one suit, DiFonzo claimed DFJ managers “forcibly removed” him from his home last summer. In a separate filing, he claimed several personal items were taken from his home, including a $175,000 Rolex watch, a $750,000 collection of rare pens, a Picasso drawing, fine china and $30,000 in wine and champagne.
DFJ appears to have raised much of its money by using investors to recruit their friends and family.
Duval Love, for example, says he heard about the company through a fellow football player who was then working as DiFonzo’s bodyguard, court records show.
Love invested about $8,000 in October, 1998, and began working part time for DFJ a month later. He eventually persuaded his parents to invest $164,000.
Love and other investors learned of the company’s problems in January but were unable to withdraw their money. Because of his role in recruiting other investors, Love is now spearheading the effort to retain attorneys and appoint a trustee, his attorney said.
“Duval Love is going out of his way to try to stop this fraud,” Katzman said.
