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Richmonder’s Ponzi scheme trial underway

Michael Schwartz October 11, 2013 0
The federal courthouse in Knoxville, Tenn. (Photo by Frank Kehren)

The federal courthouse in Knoxville, Tenn. (Photo by Frank Kehren)

A Richmond businessman is on trial this week in Tennessee, more than two years after being accused of running an alleged $7 million Ponzi scheme through several of his local businesses.

The trial of Nicholas D. Skaltsounis – along with his Richmond-based company AIC and several local subsidiary firms – began Sept. 23 and is being heard before a jury in federal court in Knoxville, Tenn.

The case stems from a civil suit by filed in April 2011 by the SEC. It charged Skaltsounis, AIC, Community Bankers Securities and other defendants for their roles in an alleged three-year, $7.7 million Ponzi scheme that fraudulently offered and sold promissory notes to at least 74 investors in at least 14 states.

Skaltsounis-suit

Download the complaint [PDF]

AIC billed itself as a financial services holding company that acquired small broker-dealers such as Community Bankers SEC, CBS Advisors, Waterford Investor Services and Advent Securities. Most of those firms had been headquartered at an office on Boulders View Drive.

The enterprise promised dividends of between 9 percent and 12.5 percent, the SEC’s case alleged, but never turned a profit, as its only source of money was that raised from new investors.

The trial is being held in Tennessee because a large number of the alleged victims live there.

Even before the SEC filed its charges, the case made waves in the Richmond legal scene when Skaltsounis sought to place blame on his attorney.

While under investigation in 2010, Skaltsounis and the firms he ran sued Richmond attorney Tom Grant and law firm Troutman Sanders, claiming that bad legal advice led them to engage in what resembled a Ponzi scheme and drew federal scrutiny. Skaltsounis and company sought $45 million in damages for alleged legal malpractice.

That case was tossed out by the Virginia Supreme Court in June 2012.

The SEC’s case centered on the idea that certain information, including the true financial state of AIC, was allegedly omitted or misrepresented in the solicitation of investors.

The civil complaint specifically alleges that Skaltsounis, as head of AIC and other firms, devised and orchestrated the offering fraud and Ponzi scheme by selling notes and stock of AIC from at least January 2006 through November 2009.

Skaltsounis, now 68, filed in August 2010for Chapter 7 bankruptcy.

The SEC’s team of attorneys is led by Michael Rinaldi. The SEC would not comment on the pending litigation.

Skaltsounis is represented by Charlottesville attorney Steven Biss. Biss did not return calls by press time.

The trial is expected to conclude this week. As of press time, both sides had made their closing arguments and the jury was in deliberation, according to court records. If the case goes in the SEC’s favor, Skaltsounis and the other defendants would have to give up any ill-gotten gains and pay civil penalties.

No criminal charges were filed against any of the defendants related to the alleged scheme.

John B. Guyette and John R. Graves, two brokers who had initially been charged in the suit from two years ago, have since settled with the SEC, according to court records.

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