Investors caught in the Panoramic View fiasco are watching closely an upcoming trial after Brian Callahan, a New York investment adviser pleaded guilty last week in US District Court to a $118 million Ponzi scheme that helped fund his interest in the Montauk beachfront resort.
Callahan, 44, of Old Westbury, Long Island, faces up to 40 years in prison when he is sentenced on Aug. 8 on securities and wire fraud charges.
Federal prosecutors indicted Callahan and his brother-in-law Adam Manson, 42, in August. Manson, who has pleaded not guilty, is due in court later this month.
Prosecutors said Callahan, the co-owner of the resort, assured investors their money would be invested in mutual funds, hedge funds and other securities, but he “siphoned off” about $96 million, and diverted millions to Panoramic to keep it afloat.
“Through lies and deceit, he misled investors and stole investor funds, including investments from a local fire department, to support a lavish lifestyle and operate a multimillion-dollar Ponzi scheme,” said US Attorney Loretta Lynch after the agreement.
As part of his plea deal, Callahan must pay $67 million in restitution that includes the sale of his Old Westbury mansion and a Westhampton condo.
To help Callahan carry out his investment scheme, Manson allegedly lied to the independent auditor of Callahan’s investment funds and together with Callahan, prosecutors charge, provided fake documents (including bogus promissory notes and doctored balance sheets) to the independent auditor, according to the indictment.
A New York judge recently ruled an offer of $54 million for the beachfront estate was inadequate. Judge Arthur Spatt rejected the bid by Ziel Feldman’s HFZ Capital.
Distraught investors are hoping for a sale for as much as $80 million. The $54 million bid would have meant a possible recovery of $34 million for investors.
The 10-acre property comprises 55 hotel rooms, 20 new luxury units/condos and three beach houses, and has attracted other bidders.