International Fugitive Extradited To United States To Face Charges Regarding Alleged Cedar Funding Investment Fraud Scheme
Former Monterey-area man accused in multi-million-dollar fraud scheme apprehended in Argentina after nearly seven years
SAN JOSE – A former Monterey-area man, Manoel Antonio Errico, was extradited to the United States from Argentina on August 23, 2016, to face fraud charges brought against him in September 2009, announced United States Attorney Brian J. Stretch, Monterey County District Attorney Dean D. Flippo, United States Postal Inspection Service Inspector in Charge Rafael Nuñez, and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.
In a federal indictment returned on September 8, 2009, Errico, 62, is accused of defrauding investors in Cedar Funding, a Monterey-based “hard money” lender.
Errico allegedly induced victims to invest in loans purportedly secured by deeds of trust and in a fund that invested in those same loans. According to the thirty-one count indictment, Cedar Funding had more than 1,000 investors while in existence.
The indictment describes various ways in which Errico allegedly defrauded investors by inducing them to purchase fractional interests in loans secured by deeds of trusts, and shares of Cedar Funding Mortgage Fund, LLC. According to the indictment, Errico engaged in a scheme, plan and artifice to defraud his targets, failed to disclose material facts, and made materially false statements.
Specifically, the indictment alleges that, among other things, by using documents provided to investors, advertisements, interest payments and verbal communications, Errico participated in creating the false and misleading appearance that the investors’ funds were invested in sound, secured real estate loans, which offered high returns and safety of principal.
In truth, by in or about 2004 and increasingly thereafter, most of the loans were not performing, and the investors’ funds were not secure.
Moreover, as borrowers increasingly failed to pay off loans, Errico, without the investors’ prior knowledge or consent, allegedly participated in extending the loan maturity dates and advanced more investor funds, which caused the loan balances to balloon beyond the initial loan amounts, diluted the investors’ fractional interests in the loans and increased the likelihood that they would lose some or all of their principal.
The indictment also alleges that, unknown to investors, the source of a substantial part of the interest that Errico caused Cedar Funding to pay to existing investors came from new investors’ funds rather than from performing borrowers.
Errico was arrested in April 2016 when he traveled from his home country of Brazil to Argentina.
He was arrested by Argentine authorities based on an Interpol “Red Notice” that had been submitted by the United States.
The United States thereafter made a formal extradition request to Argentina, and on August 1, 2016, the Argentine authorities ordered Errico extradited to the United States.
After being extradited, Errico made his initial appearance in federal court in San Jose on September 1, 2016, before U.S. Magistrate Judge Howard R. Lloyd.
On that date, Judge Lloyd conducted a bail hearing and ordered that Errico be detained pending trial. The defendant’s next scheduled appearance is September 19, 2016, before U.S. District Judge Edward J. Davila.
Errico is named in each of the thirty-one counts alleged in the indictment.
The charges and maximum statutory penalties for each count in the indictment are as follows:
Count 1, conspiracy, in violation of 18 U.S.C. § 1349: twenty years’ imprisonment, a fine of $250,000 or twice the amount of gain or loss, whichever is greater, three years supervised release.
Counts 2 through 12, mail fraud, in violation of 18 U.S.C. § 1341: twenty years’ imprisonment, a fine of $250,000 or twice the amount of gain or loss, whichever is greater, three years supervised release.
Counts 13 through 20, wire fraud, in violation of 18 U.S.C. § 1343: twenty years’ imprisonment, a fine of $250,000 or twice the amount of gain or loss, whichever is greater, three years supervised release.
Counts 21 through 31, securities fraud and aiding and abetting, in violation of 15 U.S.C. §§ 78j(b) and 78ff; 17 C.F.R. §§ 240.10b-5 and 240.10b5-2; and 18 U.S.C. § 2: twenty years’ imprisonment, a fine of $5,000,000 or twice the amount of gain or loss, whichever is greater, three years supervised release.
The court may also order that the defendant pay restitution, if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Please note, an indictment contains only allegations against an individual and, as with all defendants, Mr. Errico must be presumed innocent unless and until proven guilty.
Assistant U.S. Attorney Kyle F. Waldinger is prosecuting the case with the assistance of paralegal Beth Margen and legal assistant Stephanie Mitchell. The prosecution is the result of a sixteen-month joint investigation by the United States Postal Inspection Service, the Federal Bureau of Investigation, and the Monterey County District Attorney’s Office. The U.S. Attorney’s Office recognizes the substantial assistance provided by the Monterey County District Attorney’s Office in this case.
Courtesy: FBI Press Release