Man Gets 5 Years in Pyramid Scheme
Denounced by his victims as a coldhearted sociopath, a Los Angeles businessman was sentenced to five years and three months in federal prison Monday for defrauding more than 200 relatives, friends and acquaintances in a $21-million investment scam.
“This man is guilty of a serious crime that has devastated a lot of people,” U.S. District Judge Manuel Real said as he ordered Gary A. Eisenberg taken into custody after imposing the sentence.
Eisenberg, 64, who operated Advance Finance Inc. in Beverly Hills, pleaded guilty earlier this year to four counts of securities and mail fraud.
His victims included his half brother, his in-laws, other relatives by marriage and a large assortment of friends and business associates, according to Assistant U.S. Atty. Stephen Cazares.
One former friend, Lindsey Berkson, a medical writer from Santa Fe, N.M., told Real that she lost $629,000, her entire life savings, by investing with Eisenberg over seven years.
“I believe Gary Eisenberg is a sociopath who cannot be rehabilitated,” she told Real. “He acted like my best friend, knowing all the time that he was conning me. He stole my future and broke my heart.”
Dr. Robert Nadelberg, an anesthesiologist from Sudbury, Mass., who is distantly related to Eisenberg by marriage, told of a widowed 82-year-old relative who lost her life savings, as did her grown children, by investing with Eisenberg.
Speaking on his own behalf, Eisenberg apologized to his victims and asked forgiveness, saying: “Those who suffered most were those who loved me.”
In addition to the prison term, Real ordered Eisenberg to pay $12.7 million in restitution and to immediately surrender $208,000 from a retirement account. Cazares said an additional $1.6 million in cash and properties has been recovered through bankruptcy proceedings.
Eisenberg was in the business of advancing money to manufacturers while they awaited payments for accounts receivable, a practice known as factoring.
From 1994 through 2001, prosecutors charged, he raised more than $21 million from the sale of partnerships in his factoring enterprise, promising investors returns of 9% to 18% a year.
He told the investors that the partnerships were risk-free because the receivables were owed by Fortune 500 companies, such as Home Depot, Macy’s and American Express.
In fact, Eisenberg lent the money to high-risk clients, some of whom paid kickbacks to his employees.
As early as 1996, prosecutors said, Eisenberg knew that Advance Finance was racking up huge losses. As a cover-up, they said, he began making interest payments with proceeds from new investors.
In 2001, Eisenberg’s house of cards collapsed and he was forced to file for bankruptcy protection. The Securities and Exchange Commission filed civil charges against him as well.