A Boston husband, wife, and son received prison sentences after pleading guilty to charges they operated a $10 million Ponzi scheme that defrauded dozens of friends and neighbors. Steven Palladino, his wife Lori, and son Gregory, entered guilty pleas before Suffolk Superior Court Judge Janet Sanders on Tuesday. Judge Sanders sentenced Steven Palladino to serve ten years in state prison, while sentencing his son, Gregory, to a two-year sentence to be served in jail. Lori Palladino was given a two-year sentence that was subsequently suspended for a five year period. All three were ordered to pay restitution to victims. Their company, Viking Financial Group ("Viking"), also pleaded guilty and was sentenced to five years of probation and ordered to pay restitution.
The Palladinos were the sole principals of Viking, which advertised itself to investors as a high-yield, low-risk investment strategy carrying above-average returns by making secured loans to borrowers at high interest rates. These purportedly profitable loans allowed Viking to pay an above-average return to investors while still pocketing the difference for a healthy profit. Based on these representations, Viking took in more than $10 million from at least 40 victims.
However, in reality Viking made very few loans, and of these loans, many were made in violation of a state statute prohibiting loan interest rates exceeding 20%. Indeed, three of the loans extended in 2007 and 2008 carried interest rates exceeding 60% - which would later serve as the basis for three usury charges against Steven Palladino. The majority of investor funds served only to support a lavish lifestyle for the Palladinos that included Bahamas trips, rent for Steven Palladino's mistress, and hundreds of thousands of dollars in gambling losses. Additionally, nearly $400,000 in investor funds were used to satisfy a condition of Steven Palladino's probation stemming from a 2007 conviction for, ironically enough, defrauding an elderly relative.
The family was indicted back in September on charges that they carried out one of the largest investment scams in Boston since Charles Ponzi's infamous scheme nearly 100 years ago. Each of the three was charged with one count of larceny over $250 and larceny over $250 from a person over 60. The three were also charged with conspiracy to commit larceny, with Gregory Palladino facing an additional three counts of usury and one count of tampering with evidence.
Steven Palladino also faced loan-sharking charges after prosecutors accused him of seeking out an investor for repayment of a Viking-made loan.
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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