Son Of Bennett Fund Founder Accused In Scheme To Bilk $700 Million From Investors

WASHINGTON - Four men were indicted yesterday in a Ponzi scheme that bilked investors out of more than $700 million.

Federal prosecutors said Patrick Bennett, son of the founder of Syracuse, N.Y.-based Bennett Funding Group, was primarily responsible for the scam.

After the fraud had been committed, Patrick and his brother, Michael Bennett, back-dated documents and lied to the Securities and Exchange Commission to cover up the crime, according to the indictment.

Also charged were Charles Genovese and Gary Peiffer.

BFG was for many years a staid family firm in Syracuse, N.Y., that leased office equipment and then sold interests in those leases to investors, many of whom were retirees who were told the investments were safe.

U.S. Attorney Mary Jo White of the Southern District of New York, said Patrick Bennett squandered investors' money on himself and his family and on wildly speculative personal investments. According to court documents, these included a race track, a 70-foot yacht, a $40 million gambling barge, a hotel and other ill-conceived ventures.

"Mr. Bennett expects that the full truth will show that the Bennett companies were not a Ponzi scheme and that (they) were not run for his personal enrichment," said Charles Stillman, an attorney for Patrick Bennett. "He deeply regrets that any investor has suffered any financial injury and . . . accepts full responsibility for his actions."

Richard Breeden, former chairman of the SEC and the trustee for the bankrupt BFG, praised the prosecutors for their action. His office has collected $233 million in BFG assets and paid out more than $100 million to banks and other secured creditors. Individual investors have not yet received any money, but Breeden said he expects to make a distribution to them by the end of the year. He said he is "hopeful" that they will recoup about 25 cents on each dollar of their investment.

Under Patrick Bennett's direction, the company sold fraudulent lease contracts to thousands of investors and hundreds of banks between 1990 and 1996, according to the indictment. He then falsified BFG's financial statements in order to get loans from banks and laundered money by diverting investor funds for his own use, the government said.

In 1993, when the SEC began an investigation of BFG, Bennett initiated a scheme to obstruct the agency's probe, White said. With the help of Michael Bennett and two other conspirators, Patrick Bennett back-dated documents, created false documents and lied to the SEC, the charges said.

Michael Bennett, Genovese and Pfeiffer also were charged yesterday with obstruction of justice for their roles in the cover-up. Anthony Pavoni and Thomas Pomposelli pleaded guilty Tuesday to obstruction of justice.