Two suburban men have been sentenced to federal prison terms for their parts in Ponzi schemes that bilked 267 victims out of millions of dollars.
Michael Morawski, 56, of Sleepy Hollow, who authorities say pocketed nearly $1 million in the scheme, pleaded guilty to two counts of mail fraud and was sentenced recently to 10 years in prison. His co-defendant Frank Constant, 59, of West Dundee, pleaded guilty to one count of wire fraud and was sentenced to 7½ years in prison. A federal judge also ordered the men to pay more than $18 million in restitution.
Authorities say the defendants misused funds from their Palatine real estate investing company, Michael Franks LLC, for their own benefit and to make Ponzi-type payments to earlier investors. Between 2006 and 2010, authorities say the men obtained about $21 million, causing investors to lose more than $18 million. The men told victims they would earn between 7 and 9 percent interest annually over three to five years as investors in apartment buildings in Illinois, Texas and Alabama.
In a second scheme, Morawski and Constant encouraged victims to invest in real estate-based "funds" that would provide annual interest payments of between 8 and 30 percent, authorities said.
The defendants used funds to pay employees and themselves and make loans to friends, authorities say. Morawski and Constant also used funds to pay for a company car and country club expenses, authorities say.
Former Joliet and Chicago resident James Brandolino, 44, pleaded guilty to mail fraud and was sentenced to nearly nine years in prison and ordered to pay more than $3.8 million in restitution. Authorities say that between 2003 and 2011, Brandolino solicited nearly $5 million from 60 investors, including family and friends, with the promise of healthy returns and principal security. To convince investors to stay with him, Brandolino fabricated account statements to show gains, authorities said. Brandolino's unsuccessful futures trading cost investors $850,000, authorities said. In addition, authorities say he misappropriated more than $2 million, using the money to purchase a BMW, Rolex watch and a piano.
Lastly, a federal judge sentenced Christopher Varlesi, 54, of Chicago to five years in prison and ordered him to pay $638,227 to the 15 investors he defrauded, federal authorities said.
Between 2008 and 2012, Varlesi operated Gold Coast Futures & Forex, a firm that purported to operate a trading pool and buy and sell commodities but which was not licensed to do so. Authorities say Varlesi misappropriated investor funds for his own benefit, including $120,000 for a year's rent on a Trump International Hotel & Tower apartment.