Lorain tax consultant Richard Zakarian was charged this morning in federal court with mail fraud and wire fraud for allegedly bilking about 100 clients and investors out of more than $4.4 million.
Zakarian, 47, already had been facing theft charges and lawsuits in Lorain County after his alleged schemes, which federal prosecutors contend date back more than a decade, came to light.
"This defendant is accused of taking advantage of trust of dozens of clients, which ranged from homeless shelters and nursery schools to retirees and those with disabilities," U.S. Attorney Steven Dettelbach said in a news release. "The conduct laid out here is as outrageous as it is predatory."
The information, a charging document typically used when a defendant is likely to enter a plea in a case, also accuses Zakarian, who has been jailed since last summer, of submitting false income tax returns.
According to the information, Zakarian began defrauding private investors, some of whom were retired, nearing retirement or unemployed, in 2002.
"In one case, he induced a client to redeem a life insurance company annuity to generate investment funds and talked her out of using part of the proceeds to pay off her home mortgage and car loans," the information said.
Zakarian targeted people who trusted him because of their past tax dealings or "were financially unsophisticated," the information said, promising an annual investment rate of 12 percent in a typical investor's case.
After issuing promissory notes to his clients, Zakarian would divert their money for his own use, the information said. He also allegedly provided falsified documents to his clients showing profits for them in the accounts that were supposed be earning them money.
In some cases, Zakarian actually paid off clients who demanded their money, but often he tried to talk those asking for their profits to leave their money invested with him.
In total Zakarian stole about $1 million from 23 investors in that scheme, according to federal prosecutors.
Beginning in 2010, prosecutors contend, Zakarian began using his tax and payroll consulting company, Ben Franklin Payroll Services, to steal from clients using the company's services.
Zakarian allegedly failed to file many tax returns or make required payments and instead "diverted substantial portions of the clients' entrusted funds to pay personal and business expenses, make payments to some IRA investors, and invest in highly-leveraged, risky investments for which he had a consistent history of sustaining large losses."
In order to win those business contracts, Zakarian offered his services at cut rate prices, well below those of his competitors.
When he couldn't generate enough business for his company that way, Zakarian created a charity that he used to lure in nonprofit groups such as churches that he awarded "grants" to. Once the nonprofits had submitted their application, Zakarian would send them a letter informing them they had been awarded a grant.
He then allegedly used the money for his own purposes and when clients complained, Zakarian claimed the problems were from clerical errors.
Zakarian allegedly stole more than $3 million from at least 72 business and nonprofit clients, the information said.
Read Wednesday's Chronicle for more on this story.