Former Unadilla resident, 40, pleads guilty to misusing funds
By Denise Richardson
A former Unadilla man accused of defrauding about 10 investors of nearly $1 million has pleaded guilty in federal court and faces up to 30 years in prison, a state investigator said Thursday.
David Lippa Jr., 40, turned himself in Monday at U.S. District Court for the Northern District of New York in Binghamton, said Paul Ruffo, investigator with the state Insurance Frauds Bureau in Oneonta.
Lippa pleaded guilty to two counts of committing a securities violation and two counts of money laundering, Ruffo said. The penalty Lippa faces is not to exceed 30 years in prison and a $750,000 fine, according to a news release.
[an error occurred while processing this directive]Lippa was released, pending reappearance in court at a later date for sentencing, Ruffo said. Lippa spent investors’ money to benefit himself and his family, the investigator said. Ruffo said Lippa lives in Endicott.
David Lippa Sr. of Binghamton said Thursday night during a phone call that he didn’t know about the court case or the whereabouts of his son.
Ruffo said 10 to 12 investors in Otsego and Delaware counties were defrauded of $984,000, but that represents only victims who have stepped forward. Ruffo said he thinks other victims exist.
"It’s very difficult to get these people to step forward," Ruffo said. "A lot of them are embarrassed."
Some victims lost their life savings, Ruffo said. The "gutsiest" local victim declined to speak publicly about her experiences, Ruffo said, because "it just hurts too damn much," according to the message she left on his telephone answering machine before starting to cry.
Lippa took $10,000, $20,000, $150,000 and $200,000 at a time, Ruffo said. Lippa told customers the money would be invested, but no specific avenues were identified, the investigator said.
"There were never any investment vehicles," Ruffo said.
Lippa also would provide a certificate for one share of LFG Financial Group for an investment of $10,000, Ruffo said. Lippa sent letters to "valued customers," saying the group was doing better and expanding business, Ruffo said, and those communications maintained investors’ confidence.
"This is where he was slick," Ruffo said. Lippa paid initial investors quarterly income so that he could gain recommendations and attract other investors, Ruffo said.
Lippa ran the business in Unadilla from late 1999 to September 2001 and had 10 to 12 employees, Ruffo said. Lippa was secretive about his business, keeping his office door locked and requiring employees to make appointments to see him, Ruffo added.
Lippa used a computer to create fraudulent certificates, Ruffo said, and if he wasn’t happy with an issued certificate, he would contact the investor to exchange it.
In February 2002, the National Association of Securities Dealers reported disciplinary action against David Robert Lippa Jr. of Unadilla, a registered representative. NASD is a private-sector provider of financial regulatory services.
According to a notice on its website, NASD found that Lippa converted for his own use portions of funds from public customers who bought private securities from him. Lippa didn’t admit or deny allegations but accepted a letter barring him from association with NASD members and ordering him to pay $484,000 plus interest in restitution, the report said.
Ruffo said the three-year investigation by the state Insurance Frauds Bureau began at the request of the office of state Sen. James Seward, R-Milford, in August 2002.
Seward, chairman of the Senate Insurance Committee, said he remembered that two or three constituents contacted his office about Lippa.
"It was beyond what we could do and referred the matter to the Insurance Frauds Bureau," Seward said Thursday. "This case proves the value of that office."
Seward said he was pleased an arrest had been made in the case and that Lippa wouldn’t be able to continue the scheme.
Ruffo said Lippa didn’t have a prior criminal record.
Kinsey Koop of the state police Special Investigation Unit in Binghamton assisted in the investigation, which involved interviewing victims and employees and reviewing bank records, Ruffo said. Lippa had jockeyed funds among four to six bank accounts, Ruffo said.
He said he and Koop also interviewed Lippa, who confessed after being presented with evidence.
Lippa used investors’ money for personal belongings, including a house, cars and a houseboat that were repossessed for amounts due. Lippa has no appreciable assets, Ruffo said.
Lippa’s marriage has ended, and his former wife, Suzanne, hasn’t been charged in the case, Ruffo said.
Assistant U.S. Attorney Thomas P. Walsh prosecuted the case. Lippa, who was arrested by Walsh after surrendering himself, was represented by Lisa Peebles, a court-appointed public defender, Ruffo said.
Lippa also will have to pay restitution, Ruffo said. A federal agency will collect information from victims about money lost in the fraud case and decide on an amount of restitution, he said.
However, Lippa won’t be able to pay restitution until after his prison term, Ruffo said. Payments, he said, would be made to victims through a fund created by a federal agency that would garnish Lippa’s wages.
The investigator said he hopes Lippa’s plea will bring a sense of closure to some of the victims who have been contacting his office asking for updates.
"People have been waiting for this day," Ruffo said. "I’m really satisfied."
Ruffo said anyone who invested with LFG Lippa Financial Group and hasn’t yet reported losses to authorities can call him at 433-3627.
"We will do for them what we can," Ruffo said.