Kenneth Starr pleads guilty to fraud
Celebrity financial guru could face 10 years in prisonFinancial adviser to the stars Kenneth Starr pleaded guilty Friday morning in New York City to three charges stemming from allegations he cheated his wealthy, famous and elderly clients out of millions of dollars in what federal prosecutors characterized as a "Ponzi scheme."
Among his clients were actors Sylvester Stallone and Wesley Snipes and director Martin Scorsese, although it is unclear that those three actually suffered losses.
Starr appeared in U.S. District Court in his blue prison uniform to enter his guilty plea to wire fraud, money laundering and investment advisor fraud, which are likely to bring him a jail term of 10-12.5 years, according to federal sentencing guidelines. He is also subject to a fine up to $175,0000, seizure of property and restitution to his clients.
He is also still subject to being prosecuted on tax charges related to IRS claims, which include looting $5.75 million from a wealthy 100-year-old heiress.
Starr admitted he used a portion of his client's money for his personal purposes in what his lawyer termed "a colossal error in judgment."
Starr, who functioned as an accountant and registered investment advisor, had been in jail since May when he was arrested and was unable to post $10 million bail. He has admitted losing between $20-$50 million of money given him to invest by a high-profile group of some 200 clients.
According to the indictment, he would solicit money for what he said were low-risk investments but then move the money to more risky investments or to his personal use, including paying off a lawsuit, the purchase of an apartment on the Upper East Side of Manhattan and rental of a summer house on Long Island, New York.
Andy Stein, the former New York City Public Advocate, who was arrested the same day, in the same case, was not involved in the plea and his case continues.
It appears that Starr's wife, Diane Passage, and money manager Marvin Rosen, who had also been mentioned in publicity surrounding the case, are not being prosecuted.
The plea agreement was announced by Preet Bharara, U.S. Attorney for the Southern District of New York; Cyrus Vance Jr., District Attorney of New York Country and Charles Pine, Special Agent for the IRS.
"Kenneth Starr's is a tale of fiction and fraud, in which he played the role of legitimate investment adviser to a cast of unsuspecting victims," said Bharara in a statement. "It is also a cautionary tale for everyone who must rely on financial professionals."