The newsfeed from the U.S. Attorney’s Office in Manhattan was buried in a ton of other emails. I didn’t see it right away but it only minutes for many of our clients to hear the news – TIC promoter Carlton Cabot and his minion Timothy Kroll were arrested for their roles in one of the most depraved fraud schemes in modern history. If convicted, the men could spend the rest of their lives behind bars. For many of our elderly clients, such an outcome can’t happen fast enough.
We represent well over 100 of Cabot’s victims and there are scores more. Although Cabot’s investors run the gamut of ages, most are retired or elderly. Sadly, some have already passed away before today’s indictment was unsealed and announced. Many others are in failing health.
For many of Cabot’s investors, the money they gave to him represents their life savings. The money that was to carry them through retirement is now gone. Cabot and Kroll may go to prison but that won’t help put money back in the victims’ pockets.
The Justice Department’s press release tells only a small part of the story. Did Carlton Cabot steal $17 million? In our opinion, that and more! If that was all there was, the story would be tragic. Stealing from anyone is bad. Stealing from victims many of whom are vulnerable is vile and reprehensible.
But there is even more. Much more.
In our humble opinion, Carlton Cabot’s fraud makes him the worst scam artist in modern history. Let me explain why.
Investors in Cabot’s real estate “deals” pooled their money and invested in larger projects. By pooling funds, individual investors could participate in larger projects such as shopping centers and office buildings. The pooled funds were the down payment and the rest of the money was borrowed.
Cabot was not only the promoter of these projects; he frequently acted as the master tenant. In layman’s terms, he collected the rents and was to make sure that the mortgage got paid. Somewhere along the line, Cabot got greedy and began pocketing the rent checks.
Had the investors known, they could have quickly cured any missed mortgage payment and kicked Cabot and Kroll to the curb. They didn’t know, however.
Cabot had set up the legal documents so that investor notices were sent in care of his address. Months and sometimes years went by before the investor finally figured out something was wrong. By then, the projects were often in foreclosure and the loans accelerated.
Did Carlton Cabot steal rent money? We think so. But by hiding his crimes, his investors stand to lose everything AND STILL BE ON THE HOOK FOR A HUGE MORTGAGE.
The banks, trustees and loan servicers share much of the blame too. We have written about their liability. This post, however, is all about the arrest of Carlton Cabot and Timothy Kroll.
In announcing the arrests, U.S. Attorney Preet Bharara said,
“As alleged, Carlton Cabot and Timothy Kroll conspired to defraud investors out of millions of dollars by misappropriating investor funds, in part to pay for personal luxuries, and they falsified financial statements in an attempt to cover their tracks. The investigative work of the Postal Inspection Service and the IRS put an end to the alleged scheme.”
Both men are charged with a variety of felony crimes including conspiracy to commit wire fraud, wire fraud, conspiracy to commit securities fraud, securities fraud, conspiracy tocommit money laundering, money laundering, and engaging in illegal monetary transactions. If convicted, both men face 115 years in prison.
As of this writing, both men have been arrested and taken into custody.
Mahany & Ertl represents many victims of Carlton Cabot. We intend on closely following this story.