John Terzakis, formerly of Hinsdale, Illinois, was sentenced in federal court to 84 months in prison for conspiring to defraud the clients of Vesta Strategies. He was also ordered to pay full restitution, in an amount to be determined by the Court.
Terzakis owned Vesta through Single Site Solutions Corp., a Willowbrook, Ill., company that at one time managed land-development and commercial real estate projects in the Chicago area. Vesta was a qualified intermediary for the purpose of conducting tax-deferred real estate exchanges pursuant to Internal Revenue Service Code Section 1031 (26 U.S.C. – 1031).
Vesta, previously based in San Jose, Calif., collapsed in July of 2008 with approximately $25 million owed to its Section 1031 depositors. Vesta lacked the ability to meet its redemption obligations because its owners, including Terzakis, and managers misappropriated the money themselves, and because new client deposits were used to pay off existing depositors.
The indictment alleged that Terzakis, along with Robert Estupinian, Vesta‘s former CEO, and Peter Ye, the former vice president of operations, and later president, used the company to defraud Vesta clients of their Section 1031 deposits, and obtained money and property, namely, Vesta client deposits, by means of materially false and fraudulent pretenses.
Among the false promises alleged were claims that Vesta was a safe and financially secure Section 1031 exchange company, that Vesta client deposits would be held by Vesta, and that Vesta client deposits would be returned at the time of redemption. The indictment alleged that new client deposits were used to pay off existing client obligations, in a Ponzi-like manner, in furtherance of the conspiracy. The indictment also alleged that the Vesta owners diverted Vesta client deposits to themselves.
In pleading guilty, Terzakis, admitted to conspiracy to commit wire fraud, in violation of 18 U.S.C. – 1349 (count one); wire fraud, in violation of 18 U.S.C. – 1343 (count five); and money laundering, in violation of 18 U.S.C. – 1957 (count 10).
Co-defendant Peter Ye, San Jose, Calif. pleaded guilty on June 21, 2010, to three felony counts of conspiracy to commit wire fraud, wire fraud, and money laundering. He remains free on a bond, and is scheduled to be sentenced on Nov. 15, 2012. His related case is CR 10-00044 DLJ.
Co-defendant Robert Estupinian, San Jose, Ill., pleaded guilty on Feb. 2, 2011, to three felony counts of conspiracy to commit wire fraud, wire fraud, and money laundering. He remains free on a bond, and is scheduled to be sentenced on Oct. 11, 2012.
Terzakis is currently on home confinement with electronic monitoring, secured by a bond, and ordered to self-surrender on Dec. 4, 2012.
United States Attorney Melinda Haag announced the sentence.
Daniel Kaleba is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kamille Singh. The prosecution is the result of an investigation by the Federal Bureau of Investigation, and the Santa Clara County Office of the District Attorney.