Kessler Uncovers Ponzi Scheme
by Jane Cracraft
Published: May/June 2009
Michael G. Kessler, owner
of Kessler International, in Manhattan, is a Certified Fraud
Examiner (CFE), a member of the National Association of
Legal Investigators (NALI) and the American College of
Forensic Examiners (ACFE).
Kessler said, “A client
representing a group of private individuals came to us last
summer. These individuals had millions of dollars invested
in Agape World, and they were concerned because they weren’t
getting financial statements. They tried to get their money
back, but they were being pressured to keep rolling it
over.”
He added that his firm
began to investigate Cosmo and various companies based on
Long Island associated with him. “We learned that they were
shell companies, and that Nicholas Cosmo had served time in
federal prison for fraud.”
As the Kessler
investigation continued, “We got a lucky break,” he said.
“We were running an ad for a receptionist, and a former
employee of Agape World happened to apply. We called her in
for an interview, but it wasn’t the type of interview that
she expected.”
When the allegations of
fraud became clear, Kessler notified the Long Island Police,
the Suffolk District Attorney and the New York Attorney
General, but none of those agencies brought charges.
After Kessler issued press
releases trying to warn people about the risky investment
scheme, his firm received communications from many others
who had already placed money in the hands of Agape World.
In August, 2008, Kessler turned his information over to the
FBI, which conducted its own investigation and also brought
in the U.S. Postal Service. On January 26, 2009, Cosmo was
arrested by federal officers and charged with mail fraud.
If convicted, he could face 24-30 years in prison.
Also early in 2009, the
U.S. Commodities Trading Commission Service sought a
restraining order against Cosmo, Agape World and Agape
Merchant to prevent futures trading in commodities.
Evidently, Cosmo had been using the investors’ money to
finance his own ventures in the commodities market.
According to the federal
lawsuit, neither Cosmo nor the companies he controlled were
registered as securities dealers. A 1999 license that he
held as a securities dealer was revoked in 2000 after his
mail fraud conviction, for which he was sentenced to 21
months in prison, ordered to pay $1.7 million in
restitution, and required to receive counseling for gambling
addiction.
After his arrest, Cosmo
granted interviews to Long Island news media in which he
denied the charges, and pledged that investors would be paid
back. He said he is no longer taking in money, and is not
operating a Ponzi scheme. However, prosecutors claim they
can locate only $746,000 of the $370 million invested with
Cosmo.
According to court
documents, Cosmo claimed to be making well-secured “bridge
loans” to help small businessmen start up new enterprises.
Also, he claimed that some of the loans were intended to
provide cash to retailers while they were waiting for the
proceeds from credit card sales. Investors were promised
amazing returns of 48 percent or more, sometimes in as
little as 72 days.
Kessler noted that some
investors became interested in Agape World early in 2008
when Entrepreneur Magazine listed it as No. 73 on its
“Hot 100” list of fast-growing companies. Entrepreneur
has now added a disclaimer to its archives, noting that
there are “legal issues” for Nicholas Cosmo and his
enterprises.
CONTACT INFORMATION
Kessler International is at 45
Rockefeller Plaza, 20th Floor, New York, NY
10011. The office number is (212) 286-9100. Michael G.
Kessler can also be reached at
mkessler@investigation.com.
Jane Cracraft, an associate editor
or PI Magazine, is a former legal investigator who once
worked on the defense investigation for a Colorado man
accused of running a multi-million-dollar Ponzi scheme. The
charismatic defendant insisted until the end that he was a
legitimate businessman. |
