What’s next for Ponzi scheme’s victims?

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Perry Santillo’s guilty plea could bolster the case of class-action plaintiffs hoping to make banks repay money victims lost in Santillo’s $100 million Ponzi scheme.

Appearing before U.S. District Judge Frank Geraci Oct. 2, Santillo abandoned his earlier not-guilty plea, admitting to mail fraud and money laundering charges. He previously signed a plea agreement under which he could face a stiff prison sentence. Sentencing guidelines could make Santillo eligible for a prison term of up to 60 years and liable to as much as $282 million in restitution, Geraci reminded Santillo.

As the Rochester Beacon previously reported, the class-action case seeks to make Bank of America and Citizens Bank, which held accounts for companies that figured in Santillo’s Ponzi scheme, repay victims of the scheme. Federal authorities believe that some 600 investors who were pulled into the Ponzi scheme lost at least $70 million.

Banks targeted by the class-action suit maintain they should not be made to pay. 

Santillo’s guilty plea “provides additional proof of our allegations,” class-action plaintiffs’ attorney Mike Burger of Santiago Burger in Pittsford said this week.

Local branches of both Bank of America and Citizens Bank were used by Santillo and his confederates to launder investors’ money. The banks have moved to dismiss the class action.  U.S. District Judge David Larimer heard oral arguments in July and is still weighing a decision. 

Much of the class-action claimants’ argument rests on the role of Derline Cunningham, a local woman, who as an employee of both banks at different times allegedly aided Santillo in keeping the Ponzi scheme going.

Cunningham is not identified by name or targeted by federal prosecutors in charges leveled against Santillo. However, descriptions in federal court filings of an unidentified bank employee who helped Santillo dovetail with descriptions of Cunningham’s activity outlined in the class action.

In perpetrating the Ponzi scheme, Santillo “received assistance from an individual employed by Bank of America, and later Citizens Bank, who ensured that out-of-state checks quickly cleared and were immediately available to Santillo … and also misrepresented the amount of money in their accounts to a third-party creditor. 

“Both measures provided Santillo … with immediate liquidity that was necessary for them to continue operating the Ponzi scheme without being detected,” Santillo’s plea agreement states in a description that exactly dovetails with accounts of Cunningham’s role detailed in the class action’s filings.

The banks’ culpability rests “largely, although not solely, through the actions of a high-ranking employee, Derline Cunningham,” plaintiffs’ attorney Ben Widlanski of Kozyak Tropin & Throckmorton in Coral Gables, Fla., asserted in a court filing. 

In exchange for her agreement to falsify account information in order to keep a credit card company from shutting off a line of credit Santillo needed to keep the Ponzi scheme afloat, Cunningham on one occasion demanded and received $40,000 from Santillo, Widlanski told Larimer during the July court hearing.  

Cunningham, who is currently employed by Wells Fargo Bank in Rochester, did not return a call seeking comment this week. She previously declined to comment. 

If Santillo is hit with a $282 million restitution order, his victims would be unlikely to see much payback. Santillo and confederates in the Ponzi scheme paid out approximately $20 million to investors, leaving them with actual losses totaling roughly $70 million, Assistant U.S. Attorney John Field told Geraci. 

According to court filings and recent testimony of Santillo’s lawyer, James Nobles, assets seized from Santillo by the feds plus funds expected to come will total somewhere around $2 million or less. 

Lawyers for Bank of America and Citizens Bank maintain that Cunningham was a relatively low-level, rogue employee for whose actions their clients should not be called to account.

The class-action plaintiffs’ lawyers maintain that Cunningham, who served as a branch manager for both banks, was high enough up on the chain to make the banks responsible for her actions. 

Will Astor is Rochester Beacon senior writer.

2 thoughts on “What’s next for Ponzi scheme’s victims?

  1. My parents were one of the investors who lost their entire lives savings in this scheme due to Paul Larocco, and would like to follow any findings regarding this case.

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