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Latest Legal News from the Criminal Courts of Los Angeles, California and the U.S.
February 27, 2008
FORMER HEDGE FUND MANAGER SENTENCED TO FIVE YEARS IN FEDERAL PRISON IN SECURITIES FRAUD CASE
The founder of an investment firm that operated a hedge fund called the GLT Venture Fund was sentenced today to the statutory maximum penalty of 60 months in federal prison for lying to investors about his fraudulent operation that resulted in approximately $6 million in losses to investors.
Keith Gilabert, 33, a Valencia, California man who operated a company called Capital Management Group (CMG), pleaded guilty in 2006 to one count of conspiracy. In addition to the prison term, United States District Judge Stephen V. Wilson ordered Gilabert to pay victims just over $1 million in restitution
“The defendant committed a dastardly fraud that caused a lot of havoc and unhappiness to a lot of people,” Judge Wilson said at this afternoon’s sentencing hearing.
A second man charged in a related case, Justin Paperny, 32, of Studio City, a former securities broker at an international brokerage firm, was sentenced to 18 months in prison for conspiring with Gilabert. Judge Wilson ordered Paperny to pay $510,378 in restitution.
Gilabert operated a fraudulent hedge fund and lied to investors in an effort to convince them to invest with his fund. Specifically, from September 2000 through January 2005, CMG purported to offer investments in GLT and collected more than $6 million from more than 40 investor-clients. Even though he claimed average annual returns of 27 percent, from at least 2002 Gilabert concealed the fact that he had lost most of the investors’ funds and that he had misappropriated investors’ funds throughout most of GLT’s operation.
Gilabert conspired with Paperny to mislead CMG investors with regard to, among other things, the performance history of the GLT fund, the risk associated with investing in CMG, and the oversight of CMG by the major brokerage firm. Gilabert paid off Paperny in exchange for his assistance in the fraudulent scheme.
This case is the product of an investigation by the Federal Bureau of Investigation.
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