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Feds: Investment Adviser Spent More Than $1.4M Of Clients' Money On Luxury Cars, Clothing, Hotels

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Newscom

Chiaese, whose alleged victims include a union pension fund, surrendered to FBI agents on early Tuesday, said the New Jersey U.S. Attorney's office.

Other alleged expenses included stays at luxury hotels in New York, Florida and the U.S. Virgin Islands; at least $25,000 in purchases at high-end retailers like Hermes, Salvatore Ferragamo, Bergdorf Goodman and Saks Fifth Avenue; and $16,000 in rugs.

Chiaese admitted in a conversation with two of his close friends on Sept. 18 that he had misappropriated money, according to an affidavit from FBI Special Agent Jeffrey R. Clark.

He had been working in the financial industry since 1999 and began soliciting a number of new clients through his independent investment firm CGC Advisors LLC as early as 2008, the Justice Department said. They allege that, between November 2008 and September 2010, he raised more than $2.4 million from individuals and entities in New Jersey and New York.

One of those investments -- to the tune of around $1.71 million -- came from a pension fund managing the pensions of over 850 current and former unionized New York City public sector employees, said DOJ.

"As charged in the complaint, when Carlo Chiaese claimed to be making secure investments, he was really securing his own access to pricey diversions and ready cash," said U.S. Attorney Paul Fishman. "Although we see far too many of these schemes, we cannot become desensitized to them. Each such allegation shows that there are many out there who would steal from the unsuspecting, and we are committed to exposing their frauds for what they are."

Chiaese's case was brought in coordination with the Financial Fraud Enforcement Task Force formed by President Barack Obama.

"People invested their money with Mr. Chiaese with the hope of having a comfortable retirement," said Michael Ward, Special Agent in Charge of the FBI's Newark Field Office. "But based on the allegations in the criminal complaint, it seems those retirement plans for tomorrow did not fit into Mr. Chiaese's plan for his own comfortable lifestyle today."