NEWARK, N.J. (Legal Newsline) - New Jersey Attorney General Paula Dow has filed charges against a handful of individuals allegedly involved in a Ponzi scheme targeting elderly investors, including an attorney who was once the managing partner of a New Jersey law firm.
In March, the New Jersey Bureau of Securities, within the Division of Consumer Affairs, filed a lawsuit against Liberty State Financial Holdings Corp., which is based in Cherry Hill, and a wholly-owned subsidiary, Liberty State Benefits of Pennsylvania Inc.
An amended complaint was filed in Essex County Superior Court on Oct. 27. It adds the following as defendants:
Michael William Kwasnik, individually and as managing partner of Kwasnik, Rodio, Kanowitz and Buckley PC; his father William Kwasnik, individually, as CEO of Liberty State Financial Holdings Corp. and president of Liberty State Benefits of Pennsylvania Inc.; Joseph Anthony Schifano; Daniel Francis McCorry; and William P. Leonard, individually and as secretary and treasurer of Capital Conservation Associates Inc.
"We allege that these investors sought secure investments but instead, fell victims to a scam by individuals looking to unjustly enrich themselves," Dow said in a statement Monday.
Also Monday, the Attorney General's Office announced that Michael Kwasnik was charged in a four-count state grand jury indictment with theft by failure to make required disposition of property received, misapplication of entrusted property, theft by unlawful taking and financial facilitation of criminal activity, or money laundering, all in the second degree.
The indictment was returned on Friday, but was sealed by the court until Monday, Dow's office said.
Michael Kwasnik, who specializes in estate and financial planning, is licensed as a lawyer in New Jersey and Pennsylvania. He was hired by an elderly woman from Cherry Hill, who is not named in the indictment, for estate planning purposes. The Attorney General's Office alleges he stole more than $1 million from the woman and misappropriated the funds for his own benefit.
At the time of the alleged conduct, he was managing partner of Kwasnik, Rodio, Kanowitz and Buckley, which had offices in Cherry Hill and Woodbury, N.J. But that firm closed and he now practices law in Cherry Hill under the firm name Kwasnik, Kanowitz and Associates.
A warrant has been issued for his arrest, with bail set at $1 million.
"We charge in our criminal case that Kwasnik exploited an elderly client, misappropriating more than $1 million she intended to give to her children," Dow said. "Just as we allege in our lawsuit that Kwasnik preyed on elderly investors, we charge in the indictment that he took advantage of the frailty of this client and the trust she placed in him in order to deceive and steal.
"We will aggressively prosecute criminals who prey on this vulnerable segment of our population."
The state's Criminal Justice Director, Stephen J. Taylor, went even further, calling Michael Kwasnik a "cheat" and a "thief" who betrayed his oath as an attorney to uphold the law.
Dow's office said the defendants in the civil suit defrauded dozens of investors after raising close to $8.5 million and used some of the funds for their own "personal enrichment."
According to the 35-page amended complaint, the fraudulent scheme involved the sale of allegedly secure three-year notes, promising 12 percent annual rates of return, to 73 investors, many of whom were elderly and retired.
The investor funds that were raised were misused, in part, to pay other existing investors, the complaint alleges.
In addition, about $5 million in investor funds was allegedly "improperly transferred," in whole or in part, to certain defendants, members of their families and Michael Kwasnik's law firm, according to the complaint.
The complaint also alleges that none of the defendants or the securities were registered with New Jersey's bureau, as required by the state's Uniform Securities Law.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.