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Guilford Man Pleads Guilty to Fraud and Tax Evasion

David B. Fein, United States Attorney for the District of Connecticut, announced that CARLOS GARCIA, 48, of Bayberry Lane, Guilford, waived his right to indictment and pleaded guilty today before United States Magistrate Judge Thomas P. Smith in Hartford to mail fraud, wire fraud and tax evasion charges stemming from a $2 million investment scheme.

“The Connecticut U.S. Attorney’s Office and our federal, state and local law enforcement partners are committed to investigating investment fraud, prosecuting  those who engineer these schemes, and seeking restitution for victims,” stated U.S. Attorney Fein.

According to court documents and statements made in court, from at least as early as 2002 until 2009, GARCIA purported to be an investment advisor/hedge fund manager, selling shares in “Paramount Equity Partners, LLC,” an investment vehicle that he represented would be used to invest client funds.  GARCIA directed certain clients to cash out their stock holdings or other investments, obtain surrender checks by mail, and endorse the checks over to “Garcia Capital Management, LLC,” an entity that GARCIA controlled.  GARCIA then deposited the surrender checks into the Garcia Capital Management, LLC bank account.  GARCIA directed other clients to wire transfer money directly into the bank account for Paramount Equity Partners, LLC, and he then transferred those funds into the Garcia Capital Management, LLC bank account.

Instead of investing the funds as promised, GARCIA used clients’ money to pay for personal expenses for himself and his family, and to make “lulling” payments to clients.  Through this scheme, GARCIA victimized at least 10 people and caused a net loss to his victims of more than $2 million.

As part of the scheme, GARCIA created and mailed bogus account statements and correspondence to his client victims that discussed the returns they were earning on their investments.  In some cases, GARCIA also created false federal Internal Revenue Service Form 1065 Schedule K-1s so that victims filed false tax returns and paid taxes on returns they never earned.

GARCIA also willfully evaded the payment of income taxes for the tax years 2005, 2006, 2007 and 2008, resulting in a tax loss to the government of $38,145.

Today, GARCIA pleaded guilty to one count of mail fraud, one count of wire fraud and four counts of tax evasion.  GARCIA is scheduled to be sentenced by United States District Judge Vanessa L. Bryant on January 25, 2011, at which time GARCIA faces a maximum term of imprisonment of 60 years and a fine of up to approximately $4 million.  GARCIA also will be ordered to pay restitution to his victims and to resolve his outstanding tax liabilities with the IRS.

This matter was investigated by the Internal Revenue Service – Criminal Investigation and the Federal Bureau of Investigation.  The case is being prosecuted by Assistant United States Attorney Susan L. Wines.

U.S. Attorney Fein noted that this prosecution falls under the umbrella of the President’s Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The Task Force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.