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Banking and Finance

Extradited From Brazil, Florida Man Denied Bail For Alleged $300 Million Ponzi Scheme

 Ten years after Billboard Magazine rated his concert promotion business the third largest in the world, a Florida man recently extradited from Brazil will remain jailed until he can face trial on charges that he operated a $300 million Ponzi scheme after being deemed a flight risk by a U.S. Magistrate Judge.  Jack Utsick, 72, appeared in a Miami federal courtroom earlier today in an effort to persuade U.S. Magistrate Judge Edwin Torres to allow him to remain free until he could face trial on multiple criminal charges filed after he fled to Brazil in 2007.  Accused of a $300 million Ponzi scheme, Utsick's attorney unsuccessfully attempted to secure his client's release by informing the Court that "even Bernie Madoff got bail." However, Madoff, unlike Utsick, confessed his scheme to authorities and did not flee to a country notorious for its lenient stance on extradition.  Utsick potentially faces decades in prison if convicted of the nine counts of mail fraud filed by prosecutors.

Utsick formed The Entertainment Group Fund, Inc. ("TEGFI") in 1994, which he used to produce concerts and other stage productions often using the trade name, "Jack Utsick Presents."  Utsick later formed Worldwide Entertainment, Inc. ("Worldwide") in 2003, which he operated in the same fashion as TEGFI and which later became his principal entity to conduct his business of promoting and producing tour-related concert and stage productions and other entertainment ventures.  These projects included theatrical productions and concerts for well-known artists such as Shania Twain, Elton John, Santana, The Pretenders and Aerosmith.  To finance the often-significant upfront costs of these entertainment ventures, Utsick often sought to raise funds from potential and existing investors.  

Beginning in 2003, Utsick and his entities would form separate limited liability companies ("LLCs") which represented one of his planned entertainment ventures.  Utsick provided various written materials to investors, including promissory notes and private placement memoranda, and promised investors eventual interest payments often ranging from 15% to 25% that purportedly would be derived from the revenues generated from the applicable entertainment venture.  These investments were usually for a term of a year or less, and Utsick often convinced investors to roll-over their principal and supposed "profits" into additional investments.     

However, despite Utsick's claims that these ventures would yield significant profits to investors, the reality was that nearly all of the shows produced by Utsick in fact lost money (and at least one project was never even produced).  While investors were told that their funds were invested in a certain project, Utsick commingled all investor funds in two operating accounts which he used for the payment of all personal and business expenses.  Utsick paid millions of dollars in commissions to Robert Yeager and Donna Yeager for their efforts to recruit potential investors, and also diverted investor funds to an options trading account where he suffered at least $17 million in trading losses.  Authorities estimate that over 3,000 investors may have suffered collective losses of at least $300 million.

The Securities and Exchange Commission charged Utsick with multiple violations of federal securities laws in April 2006, and a receiver was appointed over TEGFI, Worldwide, and two entities controlled by the Yeagers.  The receiver, Michael Goldberg, grappled with multiple unique issues including ownership and lease interests in theaters and entertainment venues nationwide, as well as the discovery that the receivership entities had pledged millions of dollars to finance a National Lampoons movie.  Goldberg even ended up suing Paris Hilton for her alleged failure to promote the movie in breach of her contractual obligations - ultimately winning a $160,000 judgment.  To date, Goldberg has returned approximately $35 million to eligible victims representing a pro rata return of 21.37% of allowed claims.  The receivership website is here.

After the filing of the Commission's enforcement action, Utsick fled to Brazil when it became apparent that criminal charges were imminent.  After criminal charges were filed, Utsick sought to obtain Brazilian citizenship in an effort to thwart extradition.  The United States and Brazil signed a treaty in 1964 that provides for the extradition of anyone accused of a crime with a maximum sentence of one year or more (the equivalent of a felony).  However, Brazil amended its constitution in 1988 to prohibit the extradition of Brazilian citizens to any country, leaving the possibility of extradition available only for those with proven involvement in the narcotics trade.  Nearly 30 years later, Brazil's official policy remains to prohibit the extradition of its citizens.  Utsick's attempt at citizenship was unsuccessful, and he was ultimately held in custody for 18 months before being extradited back to the U.S. in December 2014.  

Utsick's next court appearance is Monday, February 2, 2015 for his arraignment on nine counts of mail fraud.

The superseding criminal complaint against Utsick is below:

Jack Utsick Superseding Indictment

 For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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