Another top leader of a fund firm is facing justice. This time the scandal is at New York-based Amerindo Funds. Alberto Vilar, Amerindo's founder, and Gary Tanaka were both arrested on Thursday by U.S. Postal inspectors, Bloomberg reported. The pair have been charged with fraud in two separate criminal complaints, according to the paper.

Vilar and Tanaka are accused of taking millions of dollars of investor money to make charitable donations and purchase racehorses as well as cover business expenses. The monies were allegedly taken from individual investors and not the mutual funds advised by Amerindo.

Postal Inspectors arrested Vilar as he disembarked from a flight at New Jersey's Newark Liberty International Airport on Thursday night. He was returning from the Money Show conference in Las Vegas.

Lawyers for Vilar say he will be exonerated and that a “disgruntled ex-client” made the allegations.

David Esseks, an assistant U.S. Attorney handling the case, told reporters that the charges are "very serious and very well-founded" and "we fear that they are just the tip of the iceberg."

"Amerindo is shocked over the events of the past two days," Eugene Licker, an Amerindo lawyer told Bloomberg. "The company is mindful of the presumption of innocence and awaits the outcome of the government's investigation. In the meantime, Amerindo is cooperating fully with the government."

Vilar is scheduled to appear in a bail hearing on Tuesday after spending the Memorial Day weekend in a federal detention facility in Manhattan. Tanaka's next court appearance is set for June 3.

Vilar and Tanaka spent the holiday weekend in custody after U.S. District Judge Harold Baer set Vilar's bail at $10 million on Friday. Prosecutors had asked the judge for additional time to look through 100 boxes they seized from Amerindo's offices. Vilar's lawyer Susan Necheles then told the court that his client could not raise that amount.

At a second hearing, U.S. Magistrate Judge Henry Pittman appeared to believe that Vilar could be a flight risk.

"This is a case which involves staggering amounts of money," Judge Pittman told the court. "Assuming the defense counsel's representation is right, he is worth $100 million. If he were able to flee with just 2 or 3 percent, that is probably enough for him to live out the rest of his life in comfort in many parts of the world."

Vilar's lawyers are expected to ask Baer to lower the bail amount so he can leave prison while he awaits trial.

Tanaka is being held without bail.

In one fraud complaint, U.S. Postal Inspector Cynthia M. Fraterrigo accused Vilar of diverting $5 million from one investor first into a Vilar-controlled Panamanian company and then into Vilar's own brokerage accounts. The Panamanian company had a negative balance of $428,000 in its accounts, according to the complaint. He then used the funds in his accounts to donate money to Washington & Jefferson College and the American Academy in Berlin. He also allegedly used some of those funds to cover business expenses, including a catering service and dishwasher repair. Those events happened in June 2002.

Vilar had promised the investor a $250,000 return on the investment in one quarter and told him that the $5 million would be invested with a company that was applying for a Small Business Administration grant. Vilar failed to inform the investor when the SBA turned down the grant request.

Fraterrigo described the brokerage account used by Vilar "as a personal piggy bank to pay personal expenses and make charitable contributions, without the knowledge, consent or authorization of the victim."

Tanaka is charged in a separate complaint. In that case, federal prosecutors contend that he used $1.2 million of funds from Amerindo Investment Advisors' clients to purchase five racehorses, including Agata, Don Incauto and Fruhlingssturm in three separate purchases. The Thoroughbred Times called Tanaka "one of the world’s most successful Thoroughbred owners."

Colorado newspapers have speculated that Vilar is facing financial difficulties and are reporting that he has been unable to make good on some promised charitable gifts. The Rocky Mountain News reports that Vilar owes $1.5 million on a $3.5 million pledge for the Gerald R. Ford Amphitheater stage. It also reports that he never made a promised $25 million donation to National Jewish Medical and Research Center in Denver for a building that was to have been named for him.

In addition, the paper reports that Vilar sold vacation homes in Colorado after lenders filed foreclosure actions in 2003. The Vail Daily News reports that Vilar paid the $2.74 million sought by the lendors.

Vilar continues to own a home in Beaver Creek, Colorado.

July 19 Alberto Vilar Day in Colorado.  

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