It is a bittersweet day in many households. After many agonizing years of waiting, Carlton Cabot has been charged with fraud. Civil fraud that is. Massachusetts Secretary of State William Galvin sued Cabot in an administrative proceeding brought by Massachusetts securities regulators. At best, Cabot will be fined and must pay the handful of Massachusetts residents who invested in his Ponzi scheme.
The wheels of justice often grind slowly. We know that several state and federal law enforcement agencies are still investigating him. Law enforcement as in the guys and gals with guns and badges. This isn’t a criticism against William Galvin and Massachusetts. The state securities division is limited in what remedies it can seek.
Even if Cabot was tossed in a prison cell tomorrow, its not enough. People want their money back. For some investors, it is too late. They have filed bankruptcy or died.
We represent approximately 200 victims of Carlton Cabot. At least one client is in her 90’s and many are quite elderly. Even if regulators are successful in getting back some money or putting Carlton Cabot behind bars where he belongs, nothing can buy back time. The older you get, the more time matters.
Of the many Ponzi schemes we have been worked to unravel, Carlton Cabot is the worst. In 99.9% of Ponzi schemes and other frauds, the worst that can happen is you lose your money. Yes, that is tragic but the scheme perpetrated by Cabot is worse. Much worse.
As part of the offering materials and subscription documents presented to investors (and there were hundreds of pages), buried in the documents were personal guaranties. You see, the investors in Carlton Cabot’s fraud scheme were tenants-in-common or “TICs.”
In recent years, the IRS allowed investors to pool their money together in order to purchase larger projects. Here, the TICs not only invested their own money, many unwittingly borrowed money and signed personal guaranties.
How can anyone let themselves be fooled into signing up for personal liability on real estate investments sold for upwards of $50 million? Easy! Bury the guaranties in small font, produce slick marketing materials that claim the investment is “non-recourse,” and assume that most stockbrokers who sold these investments will be so lured by the high commissions offered that they won’t conduct any meaningful due diligence.
Carlton Cabot also played off the Cabot family name, a very prominent New England family.
We suspect that it won’t be long before the feds or someone else arrests Cabot. That doesn’t get victim’s money back either, however.
Some investors may have success suing the brokers that sold them the investment. Others are going after the big banks that turned a blind eye to the thefts by Cabot taking place under their noses.
Litigation could drag on but there is hope for many investors.
Mahany & Ertl is proud to represent many victims of Carlton Cabot. If you need more information about recovering your losses or defending claims brought by the banks, give us a call. For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731.
Mahany & Ertl – America’s Fraud Lawyers