Philanthropist guilty of securities scam
Aspenite Burt Fingerhut pleaded guilty Wednesday to a sophisticated securities scam he spearheaded with friends and relatives, reaping illegal profits of more than $12.5 million. The well-known philanthropist, wilderness advocate and longtime member of Mountain Rescue Aspen faces up to five years in prison for leading the decade-long conspiracy. As part of the plea deal in the criminal case, Fingerhut has forfeited $4.5 million in illegal proceeds and will hand over $6.5 million more before sentencing in September. Fingerhut was released on a $100,000 bond, said his lawyer, Larry A. Mackey. The U.S. Securities and Exchange Commission charged Fingerhut and his co-conspirators in a sister civil case that seeks fines, interest on ill-gotten gains and a return of the illegal cash. Mackey said a proposed settlement of the civil case is under review by a judge. “The investigation continues, and we fully expect to make more arrests of those who participated in this fraudulent scheme,” said assistant U.S. attorney Karl H. Buch, who handled criminal charges against two of the defendants, The Associated Press reported. “I am terribly ashamed by my misconduct,” Fingerhut said in a prepared statement. “I fully accept that what I did was wrong. I apologize to my family and friends.” The SEC’s complaint alleges that Fingerhut, 63, a manager for Wall Street’s OppenheimerFunds from 1965 through 1983, circumvented state and federal banking regulations to make lucrative stock purchases.SEC regional director Mark K. Schonfeld called the scheme “the most extensive bank conversion fraud we have ever seen,” according to The Associated Press. According to documents, Fingerhut figured out that since depositors in a mutual bank are its owners and entitled to buy shares when the bank has an initial public offering, or IPO, he could get early options on stocks that would quickly rise in value. In order to get around limits on stock offerings and other regulations, Fingerhut’s nephew and a childhood friend traveled around the country opening bank accounts at banks where Fingerhut thought there would eventually be an IPO. “When banks convert from mutual ownership by their depositors to stock ownership by shareholders, the depositors are supposed to get first priority to purchase stock. Here, the defendants defrauded banks and depositors around the country and, in effect, jumped ahead of that line,” Schonfeld told the AP. Through the 10-year scheme, Fingerhut gained profits from sales in the market of bank stocks he obtained illegally in 65 public offerings. According to court documents, Fingerhut brought childhood friend Robert Danetz, 62, and his brother Stephen, 65, into the scheme along with Fingerhut’s nephew, Bruce, 38. To settle SEC charges, the nephew has agreed to repay $181,269 in illegal gains and pay a civil penalty of $150,000. Stephen Danetz will repay $137,975 and a $120,000 civil penalty, while the SEC’s civil penalty claims against Robert Danetz are still pending.FDIC and IRS agents searched Fingerhut’s Aspen home in February, Mackey confirmed. At the time, a district attorney in New Jersey would not comment on the case beyond confirming that the search had happened. Fingerhut is well-known in Aspen as an outdoor enthusiast and wilderness supporter. He has been on the board of both the Grand Canyon Trust and Southern Utah Wilderness Alliance and served as the chairman of the latter for six years. He has been on the governing council of The Wilderness Society since 1989 and was chairman from 1998 to 2002. He has also been on the board of the Alaska Conservation Foundation for more than a decade. Fingerhut could not be reached for comment. Joel Stonington’s e-mail address is email@example.com
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This weekend is supposed to bring snow to the Aspen area after a very dry start to January. It will be welcomed relief to anyone who straps on boards.