Paving Stone Co. Head Gets 10 Years For $26M Ponzi Scheme
By Stewart Bishop of Law360.com
A New York man on Friday was sentenced to over 10 years in prison for running a $26 million Ponzi scheme through a purported paving stone company, in a case that has also ensnared a former U.S. Securities and Exchange Commission attorney accused of aiding the scheme.
Eric Aronson, 48, the founder and head of PermaPave Industries LLC and PermaPave USA Corp., was sentenced to 124 months in prison and ordered to forfeit $26 million after pleading guilty in September 2014 to securities fraud.
Aronson was charged along with former SEC counsel and current private attorney Fredric Aaron, as well as PermaPave executive Vincent Buonauro. Prosecutors contend the company raised about $26 million from more than 140 investors between 2006 and 2010 by falsely claiming a huge demand for its product, a porous paving stone, and used the funds to make payments to earlier investors and to pay personal expenses.
According to prosecutors, Aronson and the others issued promissory notes to investors and vowed to use their proceeds to fund shipments of PermaPave paving stones from Australia to the U.S. But in actuality, according to the government, very little of the investor funds were used to fund company operations, with most of it going to repay other investors and to pay for personal expenses of the alleged conspirators.
An attorney for Aronson did not immediately respond to a request for comment on Friday. The office of Robert L. Capers, the U.S. attorney for the Eastern District of New York, issued a statement detailing the sentence but didn’t comment any further.
Buonauro in May 2014 pled guilty to conspiracy and mail fraud charges but has yet to be sentenced, according to the court docket. Aaron is due to go to trial in October. His attorney, Elkan Abramowitz of Morvillo Abramowitz Grand Iason & Anello PC, declined to comment Friday.
Last year, Aronson, Buonauro and Aaron were hit with a bruising judgment in a parallel civil action brought by the SEC, with U.S. District Judge Jed Rakoff handing down a $34 million judgment against them.
Under the final judgment, Aronson must pay $18.2 million in disgorgement and interest and a $1.4 million civil penalty; Buonauro must pay $12.6 million in disgorgement and interest and a $10,000 penalty; and Aaron must pay $1.8 million in disgorgement and interest and a $250,000 penalty.
The judge took aim at Aaron for allegedly using his status as a lawyer and former SEC counsel to reassure investors that their money was safe, while insisting that Aronson was not liable for any losses. Aaron worked in the SEC’s New York office between 1991 and 1992, according to the website for his solo practice.
Aaron has since appealed the judgment, saying Judge Rakoff’s order contradicted a 2013 settlement with the SEC, which said that the monetary judgment against him wouldn’t be calculated until a month after his criminal trial ended.
The Second Circuit is due to hear oral arguments on the appeal in November.
Aronson is represented by Paul P. Rinaldo and Anthony M. LaPinta.
The government is represented by William P. Campos and Brian Morris.
The case is U.S. v. Aronson et al., case number 2:12-cr-00245, in the U.S. District Court for the Eastern District of New York.
The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.