2LOLES Gregory Govt Supp Sentencing Memo

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UNITED STATES DISTRICT COURTDISTRICT OF CONNECTICUT

UNITED STATES OF AMERICA

v.

GREGORY P. LOLES

CRIMINAL NO. 3:10 CR 237 (AWT)

December 31, 2013

FILED UNDER SEAL

GOVERNMENT S SUPPLEMENTAL SENTENCING MEMORANDUMSEEKING OBSTRUCTION OF JUSTICE AND DENIAL OF ACCEPTANCE

This memorandum is submitted in further aid of the sentencing of Defendant Gregory P.

Loles, who as is now apparent stole more that $27 million from friends, clients, the endowment

fund and building fund of a church in Orange, Connecticut, St. Barbara =s Greek Orthodox Church

(Athe Church @ or ASt. Barbara =s@), and as recently corroborated, from a Greek family overseas.

In particular, this memorandum is submitted in support of the Government =s adjusted

Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 1 of 30


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Defendant =s Guidelines = range should also include a two-point enhancement for obstruction of

justice and he should be denied acceptance of responsibility.

I. Guideline Calculation

A. Burden of Proof

The parties agree that the Defendants base offense level pursuant to the United States

Sentencing Guidelines is a base of 7 as the offense charged has a statutory maximum of 20 years or

more. See U.S.S.G. ' 2B1.1(a)(1). The remaining factors, about which the parties do not agree,

need only be established by a preponderance of the evidence.

As the court explained in United States v. Salim , 287 F.Supp.2d 250, 305-06 (S.D.N.Y.

2003) [a]lthough the Sentencing Guidelines do not specify a burden of proof to govern the

resolution of disputed sentencing factors, the Second Circuit has held that the preponderance of the

evidence standard satisfies the requirements of due process in determining conduct relevant to

sentencing issues under the Guidelineseven for the determination of unconvicted conduct.

(citing United States v. Gigante , 94 F.3d 53, 55 (2d Cir. 1996) ( [U]nconvicted conduct may be

relied upon to adjust a defendant's sentence level as contemplated by the Guidelines based on



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Carmona , 873 F.2d 569, 574 (2d Cir. 1989)); see also United States v. Franklyn , 157 F.3d 90, 97

(2d Cir. 1998) (Disputed facts relevant to sentencing must be established by a preponderance of

the evidence, and the sentencing court may rely upon any information known to it).

A. The Amount of Loss is Over $20 million

The amount of loss suffered as a result of the fraud now is calculated above $20,000,000.

Therefore, the offense level is increased by 22 pursuant to U.S.S.G ' 2B1.1(b)(1)(L).

As established in the Government =s Sentencing Memorandum and as established by

witness testimony at the Defendant =s sentencing hearing, the Defendant stole over $12 million

from St. Barbaras Church, his friends and investor-clients in the United States, and individuals he

met through his Farnbacher-Loles car businesses and subsequently defrauded.

However, as established in more detail below, after the Defendant testified under oath that

$14 million from Milbury Holdings was his money purportedly from a combination of profitable

trades in the Greek stock exchange and twelve years of compounding from an initial investment

of a million Euro or a little bit more than a million Euro, originally made in the late 1980s, the

Government investigated and has established that the money was not the Defendants money.



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calculation. See Attachment A (Government Exhibit 1C). Loles theft and fraudulent taking

of the additional $14 million was part of the same fraud scheme and, as explained in detail by

counsel for the victim family, Loles used the same motis operandi and same manner and means in

defrauding the Family as he did with all the other victims. He pretended to befriend

them, gained their confidence even attending a family funeral in Greece, told them he had

millions of dollars under management, told them he had investments for them that would pay a

certain steady percentage, provided them corresponding account statements, impressed them with

his luxury car businesses, and eventually stole their money. ( See Attachments F, G, H, I, J, and

K).

Accordingly, the loss amount for the Guidelines calculation should be found to be well

above $20,000, 000. Thus, resulting in an increase of 22-levels for the amount of loss.

B. Determination of the Number of Victims

As set forth in the Government =s Sentencing Memorandum (Gov. Mem. (Dkt. No. 80) at

29-33) and the Reply Sentencing Memorandum (Dkt. No. 89) as well as the additional arguments

made before the Court, in determining the specific offense characteristic for the number of victims,



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the Churchs Building Fund prior to December 2009. These are 327 specific identified

individuals and families and 86 specific school children who gave their money to the St. Barbara

Building funds before the discovery of the fraud in December 2009 (a few were anonymous).

These specific identified donors, many of whom were families and couples, resulting in over 700

in total, should be included in the Courts calculation of the number of victims. This is not an

unidentified amorphous group of donors but, to the contrary, comprise a specific identified list of

donors who were victimized.

The inclusion of these individuals as victims for Guidelines purposes is clearly supported

by controlling case law. In United States v. Gonzalez , 641 F.3d 41 (2d Cir 2011) the Second

Circuit reached this conclusion regarding donors to a charity, a holding that is clearly on point here

and should be followed as controlling precedent. In Gonzalez , the Second Circuit found that the

individuals who made charitable contributions were properly considered victims pursuant to

U.S.S.G. 2B1.1(b)(2) and held as follows: [a] donor whose charitable contribution was included

in the district courts finding of actual loss under 2B1.1(b)(1) is thus, by definition, a victim

within the meaning of 2B1.1(b)(2). There is no suggestion in this definition or any other part of



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The Eleventh Circuit reached the same conclusion in United States v. Longo , 184 Fed.

Appx. 910, 2006 WL 1674267 (11th Cir. 2006) (unpublished per curiam). In Longo, the Eleventh

Circuit held that the district court did not err in counting as victims all 110 individual members of

an employee benefit plan from which the defendant embezzled. See Longo , 184 Fed. Appx. 910,

970 n.1 (noting that the record showed that Longos fraud and theft diminished the total plan

assets). As the Government has argued previously in this case, the Eleventh Circuit's analysis in

Longo applies here. In Longo, each participant in the employee benefit plan put money into the

plan and sought to draw on it in the future. When the plans funds were diminished by the fraud

each employee who had contributed was determined to be a victim. Here, as the money was

going to the St. Barbara Endowment fund and Building fund, each parishioner, including the 86

school children, relied on the fact that they believed the money would be there in the future to

support the Church and its programs. Similarly in United States v. Ellisor , 522 F.3d 1255, 1275

(11th Cir. 2008) the Court found that where money belonging to multiple individuals has been

aggregated by a school for the production of a Christmas pageant (not too different from pooling

funds for the construction of a building) and each individual maintained his or her interest in



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Finally, as previously argued, if the Court determines that a mere four-level increase is

appropriate based on the discrete victims, the Government will argue for an upward departure so

that the losses suffered by the parishioners B as members of the church who donated to the building

fund and the school children who collected coins and donated portions of their allowances B are

considered by the Court.

C. Obstruction of Justice

a. Legal Standards

The U.S. Sentencing Guidelines direct that:

If (A) the defendant willfully obstructed or impeded, or attempted toobstruct or impede, the administration of justice during the course ofthe investigation, prosecution, or sentencing of the instant offense ofconviction, and (B) the obstructive conduct related to (i) thedefendant's offense of conviction and any relevant conduct; or (ii) aclosely related offense, increase the offense level by 2 levels.

U.S.S.G. 3C1.1 (emphasis added). The Guidelines provide that the conduct to which this

adjustment applies is not subject to precise definition, U.S.S.G. 3C1.1, Application Note 3, and provide a non-exhaustive list of conduct to which the adjustment is intended to apply, U.S.S.G.



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4(H). For the false statements to be material, they must be information that, if believed, would

tend to influence or affect the issue under determination. U.S.S.G. 3C1.1, Application Note 6;

see also United States v. McKay , 183 F.3d 89, 93 (2d Cir.1999) (defendant's statement in

pre-sentence interview that he was a peripheral participantwhen in fact he was the leader of a

narcotics ring, which resulted in an erroneous Probation reportwas material because it could

have impeded imposition of an appropriate sentence); United States v. Johns , 27 F.3d 31, 34 (2d

Cir.1994) (Under the law of this Circuit ... we look to the defendant's representations in deciding

the issue of materiality. If those representations could affect the sentence (if believed), then it is

irrelevant that the government has possession of other information that rebuts the defendant's

representations.); United States v. Rodriguez , 943 F.2d 215, 218 (2d Cir.1991) (The definition of

a material statement embraces all false statements that would tend to affect a defendant's

sentence, whether or not discovery of the falsity of the statement is inevitable.).

As the Salim court discussed, in Second Circuit cases upholding application of U.S.S.G.

3C1.1 wherein a defendant made false statements, it is apparent that the defendant's false

statements would have improved the defendant's position with respect to the proceedingeither



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finding him guilty concerning the charges in the indictment); United States v. Ventura , 146 F.3d

91, 98 (2d Cir.1998) (Defendant's false statements about his age, accompanied by fraudulent or

forged documents, were made in order to secure a more favorable sentence, caused

considerable delay in sentencing, and required investigation by a number of officials of the

United States and Honduran governments.); United States v. Rodriguez , 943 F.2d 215, 218 (2d

Cir. 1991) (Defendant stated falsely to probation officer that he had no prior record, when in fact

he had been arrested and convicted six times previously)).

b. Defendant Provided False Testimony Regarding $14 million in Losses

It is clear based on the entirety of the evidence, including his own statements, documents

previously collected by the Government, and the information discovered through the

Governments additional investigation, that Loles provided material false testimony to the Court

during his re-direct and re-cross examination on November 25, 2013, ( see Attachment E ) and also

provided materially false information to the Federal Bureau of Investigation during the course of

numerous interviews. ( See Attachments L-P). These false statements if believed would have

influenced the Courts determination of the estimated loss amount, and ultimately the seriousness



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Q. Who did it belong to?A. The money that came is money that I earned with John over the years

primarily in trading over the Greek stock.

Q. Essentially, it was you're money?A. Well, yeah. That's why it came in the fashion it came. It was just sortof on demand.

THE COURT: Can you explain that a little more?

BY MR. DONOVAN:Q. Why don't you explain that a little bit more. Tell us how that money wasearned?

THE COURT: How it's his money if it's Milbury Holdings money?

BY MR. DONOVAN:

Q. Why was Milbury Holdings money really yours?A. Milbury Holdings was the investor for most of the investing that he and Idid in the Greek -- Greece was an emerging market in the early '90s and soforth. So there was huge interest and appreciation in the market.

Q. Remind us who "he" was?A. He was Mr. who passed away, who was a friend and lawyer thatrepresented -- because we lived in Greece, as you know, for a number of yearsand that's where I met him. So when the Greek markets started doing well andthere was a lot of investing, I was sort of already in the investment business andhere we had a emerging market at our feet. A lot of new capitalization and so



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Q. You don't have to go through all the details.

THE COURT: I guess I'm getting the impression from what your client is sayingis that he's saying he put money into Milbury Holdings, Mr. putmoney in, and that money was invested and he subsequently got a return of hisinvestment with earnings. I guess what I'm interested in is when did he putmoney in and how much? Does that come out? Is that somewhere in therecord?

BY MR. DONOVAN:

Q. Could you tell us that?A. Let's see. My contributions would have been now we're talking in thelate '80s . I can go to the bank records and probably try to -- well, not bankrecords here.Q. Just roughly?A. I would say a total of a million euro , a little more than a million euro.

Q. And that was an investment made in the late '80s ?A. Yeah. That's way, way early. My dad had some property. We had soldsome things. And everybody in Greece was investing in the market. And wehad done -- and that was sort my contribution. And then he kept his ledgerabout sort of what was mine, what was his. I was, if you will, the more marketknowledgeable person. But again, it was a roaring bull market. So it wasmore just being in the right place at the right time.

Q. And what period of time did the trading take place, the initial public offeringsand the investment in companies?



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(Attachment E Re-direct Testimony of Loles at 6-10.)

Then, on cross examination, and in response to questions from the Court, itself, Defendant

Loles gave the further following materially false testimony also on November 25, 2013.

(Attachment E at 26-33).

Q. Do you remember telling the FBI that the intent was that Loles was growingthe Farnbacher Loles business and he would reconcile with George later? Doyou remember telling the FBI that, that you would pay George his money backlater?A. Well, I think reconcile with George -- it wasn't George's money. It wassitting in Milbury Holdings.

Q. It was the family's money, correct?A. No, it was not. Not what came here. If there was more money inMilbury Holdings, that could be theirs, but that's not accurate whatyou're saying.

Q. I'm just quoting you back to you. So if it's not accurate, which time wereyou not accurate? When you talked to the FBI for four hours in 2010, or whenyou talked to this judge for two hours today? Which time was it not accurate?A. Mr. McGarry, George was afraid that the $14 million would be seized.Medtronic --

Q. Let me put it this way: George would have no reason to worry about the $14million if it was your money, would he? But he was worried about it beingseized because it was not your money, correct?



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* * *

THE COURT: I guess I'd like to understand something.THE WITNESS: Yes.

THE COURT: We're talking about $14 million. You say you put in, I think, amillion euros originally back in 19 THE WITNESS: In the '80s .

THE COURT: So just explain to me --THE WITNESS: The growth --

THE COURT: -- what happened to that money and how much was in atthe time we're talking about when we're talking about the $14 million?How much was in Milbury Holdings and who did it come from?THE WITNESS: I only knew what I had an interest in. So I don't knowthe total balance of Milbury Holdings .

THE COURT: Okay.THE WITNESS: Because again --

THE COURT: So just give me a rough approximation over the years, so far asyou can, from the 1980s to the point in time we're talking about, about howmuch money you had in Milbury Holdings?THE WITNESS: Well, eventually it grew to that full amount.

THE COURT: What full amount?THE WITNESS: The 14.



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obviously, with the big capitalizations, just like when the market was growinghere, these things were coming public at 120 percent. Big increases as new

companies were being capitalized. And we, like everyone

THE COURT: I guess what I'm trying to get a sense for is at what rate did thevalue of your investment in Milbury Holdings grow?THE WITNESS: I guess it was compounding we can sit and calculate. Ithink it was about 12 years of active trading. So it was compounding at 25

percent.

THE COURT: 25 percent a year on average?THE WITNESS: Maybe a bit more. Obviously, by leaving the money in andtaking bigger and bigger allocations, I mean, some of these --

THE COURT: I'm only interested in numbers.THE WITNESS: Yes.

THE COURT: I think you're supposed to be financially astute. 25 percent ayear or more compounding?THE WITNESS: Right.

THE COURT: That answers my question. And then at the end of thistime period your total -- the total value of your investment was $14million?THE WITNESS: Thereabouts.

THE COURT: That was everything?THE WITNESS: That was everything. And obviously, when it was all

brought



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c. Defendants Testimony Regarding $14 Million is Demonstrably False

The testimony Loles provided the Court is demonstrably false for a number of reasons,

most importantly it is directly contradicted by information and documentary evidence provided by

an attorney for the victim-family.

After Loles provided the new and wholly incredible testimony to the Court, the

government reinitiated the investigation into the source of the $14 million, about which the

Government had been aware but had not previously focused on. As background, on May 21,

2010, Loles had been specifically asked about Milbury Holdings and the approximately $14

million wire transfers into his accounts. (Attachment M). Loles gave a detailed answer to

questions about Milbury Holdings and never mentioned or alluded to the funds being his money

or his share of the trading profits. He never mentioned his being entitled to trading profits, or a

million Euros invested in the late 1980s, or any portion of the Milbury money being his money.

Loles told the government that Milbury Holdings was personal company comprised

of his personal money. (Attachment M at 2). Loles provided a lengthy and complex

explanation that included statements regarding: how was only getting 1%



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FBI that the approximate $14 million received from Milbury Holdings went into Farnbacher Loles

and for other general purposes. Milbury Holdings was not going to give Loles money to build his

business or to make investments like the church or other individuals. Milbury Holdings was

giving the money to Loles to park it . (Attachment N at 7). As discussed more below, the

family did in fact believe that they had invested with Apeiron and produced account

statements, and an account questionnaire, as well as photographs taken at Loles home, in New

York City and at his garage, to support their belief that he was their investment advisor and they

had invested with Apeiron and Somerset Partners. (Attachments I, J, at K).

Also during the May 21, 2010 interview, Loles told the FBI that George [and the

family] was not a who invested his money with Loles.

(Attachment M at 4). This was not true. ( See Attachments F, G, I, J and K). Loles stated that

there was no formal agreement from George to invest in Farnbacher Loles but to simply take the

money off his hands, but it was the family's money. Loles also stated that George

was afraid the $14 million would be seized by the authorities in the United Kingdom.

(Attachment M at 4). When confronted on re-cross examination with the direct contradiction



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London, referencing Mr. Cook and their client (the family) and the significant sums

that had been sent to Loles for investment purposes . (Attachment R).

After Loles provided the Court sworn testimony that directly and materially contradicted

his earlier statements regarding the ownership of the $14 million and the documents provided by

his own counsel, the prosecution team, in coordination with the Department of Justices Office of

International Affairs and the Federal Bureau of Investigations London LEGAT, reached out to the

London Solicitors and spoke to Mr. Cook. After a brief conversation with Mr. Cook and a

subsequent phone call, the Government was contacted by Attorney Frederick Kessler on behalf of

the family.

Attorney Kessler provided a detailed history of the family relationship with

Loles and also provided documents that established that the family, like the scores of

other individuals and families that dealt with Defendant Loles, were victims of his fraud.

Attorney Kessler provided an Apeiron account statement that is precisely the same type of

fraudulent account statement provided to the other victims. (Attachment I). Attorney Kessler

also provided, from the family, what appeared to be at least to the family



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Attorney Kessler told the FBI that Loles abused the trust placed in him by the

family. Kessler stated the family was the biggest victim of his Loles scheme.

(Attachment F at 1). Attorney Kessler explained to the FBI that Milbury Holdings was an entity

of the family. The money sent from Milbury holdings was not Loles money. The

money belonged to the family. Milbury Holdings is the familys

investment vehicle and it included three victims. Kessler primarily dealt with George .

( Id . at 1).

Attorney Kessler explained how Loles had nurtured the trust of the family just as he had

done with so many parishioners at St. Barbaras. Attorney Kessler explained that George had

been hosted by Loles at his home when his kids went to the Hopkins School, back in 2002. ( Id . at

1) and Attachment S). This apparently was the nurturing of the relationship of trust that Loles

later used to steal the millions of dollars. After the death of Georges father, the family sent

millions of dollars to Loles. Approximately three months or so after Georges father passed

away, Loles contacted George and told him that he had a $300 million fund which was how he was

able to get 7 to 7.5% returns on investments. (Attachment F at 1).



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George and the Loles family was sporadic. In June of 2007, Georges father passed away. The

next day Loles flew to Greece to attend the funeral. This gesture was much appreciated by the

family at that time. Loles stayed for several days and said he would return to Greece

at some point. (Attachment G at 2).

Later in the summer of 2007, Loles did return to Greece and told George, Georges mother,

and Georges sister that he, Loles, had a $300 million fund that got modest returns of about 7 to

7.5%. Loles explained his fee for managing this money was 1.5% of the assets under

management, but since the family was like family to him, Loles would not charge a fee.

Later in 2007, more wire transfers came from the family account in London to Loles.

In the later part of 2007, when the wires continued George explained that Loles played the role of

second father to George. Loles and George spoke on the phone and discussed Georges education

and his girlfriends and Loles bragged about his Porsche dealership and investments. ( Id .). This

discussion of the courting of the family is remarkably (and predictably) similar to the

experiences provided to the Court by the and other parishioners who were told by

Loles that they were like family or like a father to him. This is even more despicable when



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since Georges original 2002 visit. ( Id . at 2; Attachment K). George observed fancy cars

including a Porsche, Mercedes, BMW and a Range Rover. Many of the rooms inside the Loles

house had plasma televisions which was rare at this time. ( Id . at 3). On New Years Eve George

observed Loles book their dinner reservations using an American Express Black card which was

an exclusive credit card. They enjoyed fancy dinners at this time. During this visit the

family also visited Loles race car business. (A photograph is attached at Attachment

K depicting the visit to the car racing facility). Clearly Loles was using the racing car business to

establish his bona fides as a wealthy successful money manager. As has been stated by other

victim-witnesses, George observed a Bloomberg terminal in Loles office in the car racing facility

which gave Georges family the impression that he was an Investment Advisor. (Attachment G at

3). At this time the family did not live a wealthy lifestyle like the Loles family. It

was during this Christmas visit that Loles gave the family the investment statements

from Apeiron Capital Management. (Attachment G at 3; Attachment I).

In the spring of 2009, Loles asked George to send money to Knightsbridge which served as

Loles investment vehicle. (Attachment G at 4). At that time wire transfers were sent to



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G at 4). Accordingly, statements to the Court that Loles took his share of the Milbury money

and there is other money there, while wholly incredible on its face, is further belied by his greed in

which he took all of the money in the Milbury Holdings London account.

In January of 2010 after Loles was arrested, George reached out to the Bermudan law firm

to inquire about his investment. It was then that he learned the Bermuda entity (Attachment J)

had never heard of Loles and the forms Loles had filled out on their behalf could have been

obtained by simply going to their website. (Attachment G at 4). Loles was supposed to have

established Somerset as an investment funds or account for the family which George

now knows never existed. (Attachment G at 4).

In a follow-up discussion, Attorney Kessler explained to the FBI that the family

had no knowledge of any partnership agreement between Ioannis (the father) and Loles for

investment purposes. (Attachment H). The family had no knowledge of any

involvement with investments in Smith and Nephew or Medtronic. Loles never told the

family that he, Loles, and their father Ioannis had a partnership of any kind. ( Id. ).

Their father also never mentioned that he had a partnership with Loles when he was alive. ( Id. ).



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Government counsel during re-cross examination. However, as the Court is presumably aware,

the Euro as a currency was not in existence in the late 1980s nor was the European Union. The

Euro itself was introduced January 1, 2002. ( See Attachment T). Thus, typical of a con-mans

effort to deflect and distract, Loles was clearly just using the Euro to sound international and

making up figures and numbers out of thin air.

Second, Loles also told the Court that he turned one million Euro into $14 million by

investing in the bull market, and being in the right place at the right time. However, upon inquiry,

Loles could not give a single concrete example of a company he invested in or an investment he

made, an IPO he participated in, or a trade that he engaged in on behalf of Milbury Holdings. As

the Court observed, he is supposed to be financially astute, having held a brokers license and

having passed the Series 7, Series 63, and Series 65 exams. (Attachment U at 6). In fact, Loles

scored a 96 on the series 7 exam and an 88 on the series 63 exam. ( Id .) Yet, while under oath he

could not explain to the Court what he invested in, what IPOs he had purchased, or how the money

grew.

Typical of a con-man, Loles was long on generalities, spoke about the market, even



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confirmed the trades, which firm he used as a settlement agent, why the money was in a London

account, or why a 19 year-old in Greece and his mother had control of the funds as compared to

Loles himself. As he said in his own words, Because it was in their family entity. I didnt

have direct link. He knew his father and I had dealings, but I didn't have -- I couldn't go

and physically take the money out. (Attachment E at 27). It simply makes no sense, that a

sophisticated licensed investment professional would have $14 million and have no direct link and

couldnt go and take the money out. That is not a credible story because it is false. What rings

true is that he had no direct link and could not go and directly take the money out because it was

not his money and thus he had to fool the family into giving him the money as he did with

everyone else.

Third, Loles did not and simply could not explain on re-cross examination why he had

entirely failed to mention in the hours and hours of interviews that the $14 million was his own

money, including when he was asked by the FBI specifically about Milbury Holdings.

Additionally, on direct examination that had occurred a few weeks prior (Attachment D), Loles did

not mention that he had made $14 million in trading, yet he painstakingly took the Court and the



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and never mentioned that he had done significant trading in the Greek market. As pointed out in

Court and addressed above, Loles spoke to the FBI for hours including specific questions about

Milbury Holdings and never mentioned that it was his money. (Attachments M, N, O, P).

The interview Loles gave to Probation, as set forth in the PSR, does not mention anywhere

his purported prolific trading and the millions of dollars of profit he made with Milbury Holdings

in the Greek markets. Paragraphs 113, 114, 115, 116, 117, and 118 describe his work history and

he plainly did not tell the U.S. Probation Officer about Milbury Holdings or his business dealings

overseas. In fact, paragraph 115 describes him taking a job as a stockbroker trainee at Investors

Associates, Inc. in New York City, in 1992. The Court may wonder why Loles would need to be

a mere trainee in New York City if he were in the midst of a 12 year run, begun in the late

1980s, of generating returns through compounding of 25% per year every year. As reflected in

paragraph 117 of the PSR, Loles told Probation he earned approximately $350,000 per year as an

investment advisor from 1995-2002. This clearly does not include any of the $14 million made

from Milbury Holdings, presumably because he made no such money. His work history reflects

that of a failed broker who turned to a Ponzi scheme to support his lifestyle, not that of a



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Similarly, with regards to New Haven Savings Bank, Loles described for the Court at great

detail how he was able to secure money from a man named Gus Boosalis but at incredibly high

rates for the parishioners to participate in the mutual bank conversion. Had Loles actually been

entitled to the $14 million in the spring of 2004, before the death of Mr. would not this

money have been used to help the church and parishioners rather than pay the extortionist rates

Boosalis was charging the St Barbaras parishioners? Obviously Loles had no rights to the

Milbury Holdings money until he took it from the family by fraud after the fathers

passing.

Additionally, in connection with the New Haven Savings Bank transactions, Loles

provided sworn testimony to the United States Securities and Exchange Commission (SEC) on

March 23, 2006. This sworn SEC testimony has been previously provided to the Court. In that

testimony, sworn and under oath, Loles was asked what he had been doing in terms of employment

for the last 10 years, which would cover back to at least March 1996. Loles gave various answers,

memorialized on pages 7 through 10, and at no point did Loles mention trading in the Greek

markets and making millions of dollars through Milbury Holdings. Such information, if true



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he told Probation and what he originally told the FBI, but is not consistent with his sworn

testimony to the Court that he was trading in the Greek markets from the late 1980s again

trading a million Euros which did not yet exist and earning approximately 25 %.

In summary, prior to taking the stand and seeking to mislead the Court, Loles had spoken

with the FBI on numerous occasions and never mentioned trading in the Greek markets and

making $14 million in the Greek stock market. He gave a Pre-Sentence Interview to U.S.

Probation and never mentioned making $14 million in the Greek stock market. He gave sworn

testimony to the SEC, who asked about his investment and investment advisor history and work

history, and he never mentioned trading in and making $14 million in the Greek stock market. He

applied for and received a Series 7, a Series 63, and a Series 65 license and never mentioned to

FINRA that he had engaged in trading in the Greek stock market, and in fact, to the contrary

indicated that his work was not investment related . In fact, he even testified on direct

examination on November 7, 2013 and even addressed Milbury Holdings specifically (Attachment

D at 68-70) and mentioned that he wanted whistle blower protection related to Milbury Holdings

and Smith and Nephew, but never mentioned that it was a trading vehicle that he had an ownership



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D. Loles Alternative Version of the FactsIt is commonly said that one is entitled to ones own opinion but not entitled to ones own

version of the facts. Loles seems to want multiple versions of the facts depending on his

predicament. In that regard, the Government contends that the facts are as presented by the

Government both in Court and set forth above and in the cited attachments. That is, that Loles

made materially false statements to the Court.

However, it bears mention that if Loles version of the facts were to be true which they

are not and if he did in fact have $14 million in Milbury Holdings upon which he could draw but

which he did not call upon until approximately 2007, then he stands before the Court as an

individual who was a millionaire 14 times over but still chose to run a Ponzi scheme and defraud

his friends and fellow Parishioners. He stands before the Court a multi-millionaire 14 times over

who still chose to steal the money from the St. Barbara Church Endowment fund and Building

fund, including stealing scholarship money and money donated by hundreds of families

(Attachment B) and collected by school children. (Attchment C). He would stand before the



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himself, the Endowment Fund, the Building Fund, all while having a $14 million nest

egg in London at Milbury Holdings. Frankly, this newest version is simply not believable.

What is believable and what is the true version of the facts is that even after four years of

incarceration Loles has still not yet learned any lessons, that he still seeks to deceive, mislead and

outright lie if he perceives it will benefit him in some way. Now Loles has succeeded in adding

the Court itself to the list of those to whom he has lied and should be found to have obstructed

justice.

Thus, no matter which version of the facts the Defendant choses to advance, and as a

con-man he has advanced many versions, he must still be sentenced to a remarkably long term of

imprisonment.

Accordingly, the Government now calculates the Guidelines range as follows:

Base Offense Level 7Loss Greater than $20,000,000 +22More than 250 Victims + 6Charitable Misrepresentation + 2Sophisticated Means + 2Violation of Securities Law while acting as Investment Advisor + 4Money Laundering in Violation of 1956 + 2



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II. CONCLUSION

For the foregoing reasons, those set forth in the prior Government =s Sentencing

Memoranda, and those advanced in open Court, the Government respectfully submits that, under

the circumstances of this case the Defendants Offense level is a level 49. Moreover, under either

calculation, the Court should not hesitate to give Defendant Loles a remarkably long period of

incarceration and an order of restitution of over $26 million to the victims of his crimes.

Respectfully submitted,

DEIRDRE M. DALYUNITED STATES ATTORNEY

/S/MICHAEL S. MCGARRYASSISTANT U.S. ATTORNEYFederal Bar No. CT25713157 Church Street, 23rd Floor

New Haven, CT 06510Tel.: (203) 821-3751Fax: (203) [email protected]



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CERTIFICATION

I hereby certify that on December 31, 2013 a copy of foregoing Government =s Sentencing

Memorandum was filed electronically and served by hand on anyone unable to accept electronic

filing. Notice of this filing will be sent by e-mail to all parties by operation of the Court =s

electronic filing system or by mail to anyone unable to accept electronic filing as indicated on the

Notice of Electronic Filing. Parties may access this filing through the Court =s CM/ECF System.

/S/

MICHAEL S. McGARRYASSISTANT U.S. ATTORNEY



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ATTACHMENT A

Case 3:10-cr-00237-AWT Document 163-1 Filed 02/20/14 Page 1 of 3



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Case 3:10 cr 00237 AWT Document 163 1 Filed 02/20/14 Page 3 of 3

C 3 10 00237 AWT D 163 2 Fil d 02/20/14 P 1 f 9


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ATTACHMENT B


C 3 10 00237 AWT D 163 2 Fil d 02/20/14 P 2 f 9


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Individuals, Families and Parish Organizations who made donationsto the Building Fund Prior to December 2009

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.16.

17.

18.

19.

20.

21.

22.

23.

24.

25.


C 3 10 00237 AWT D t 163 2 Fil d 02/20/14 P 3 f 9


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43.

44.

45.46.

47.

48.

49.

50.

51.

52.

53.54.

55.

56.

57.

58.

59.

60.

61.

62.

63.

64.

65.

66.

67.

68.69.

70.



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133.

134.

135.

136.

137.

138.

139.

140.

141.

142.

143.144.

145.

146.

147.

148.

149.

150.

151.

152.

153.

154.

155.

156.

157.

158.159.

160.




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178.

179.

180.

181.

182.

183.

184.

185.

186.

187.

188.189.

190.

191.

192.

193.

194.

195.

196.

197.

198.

199.

200.

201.

202.

203.204.

205.




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223.

224.

225.

226.

227.

228.

229.

230.

231.

232.

233.234.

235.

236.

237.

238.

239.

240.

241.

242.

243.

244.

245.

246.

247.

248.249.

250.




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268.

269.

270.

271.

272.

273.

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275.

276.

277.

278.279.

280.

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283.

284.

285.

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288.

289.

290.

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292.

293.294.

295.




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313.

314.

315.

316.

317.

318.

319.

320.

321.

322.

323.324.

325.

326.

327.

328.

329.

330.

Number of Pledges: 330




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ATTACHMENT C




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Sunday School and Greek School Children Who Collected Coins andDonated Portions of Their Allowance and Donated to the Church's

Bui lding Fund Prior to December 20091.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

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18.

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21.




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36.

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40.

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48.

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53.

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60




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75.

76.

77.78.

79.

80.

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84.

85.

86.

Number of Pledges: 86

Case 3: 0 c 00 3 W ocu e t 63 3 ed 0 / 0/ age o



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ATTACHMENT D

g



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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF CONNECTICUT

- - - - - - - - - - - - - - - - x

UNITED STATES OF AMERICA 3:10CR00237(AWT)

vs.

GREGORY P. LOLESHARTFORD, CONNECTICUT

Defendant NOVEMBER 7 , 2013

- - - - - - - - - - - - - - - - x

EXCERPT OF SENTENCING HEARING - VOLUME II

DIRECT EXAMINATION OF GREGORY LOLES

BEFORE:

HON. ALVIN W. THOMPSON, U.S.D.J.

APPEARANCES:

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2

TABLE OF CONTENTS

WITNESS DIRECT CROSS REDIRECT RECROSS

GREGORY LOLES

BY MR. DONOVAN: 3

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3

(Transcript excerpt follows.)

MR. DONOVAN: May I call Mr. Loles, please.

THE COURT: Yes.

GREGORY LOLES,

called as a witness, having been first duly

sworn or affirmed, was examined and testified

as follows:

THE CLERK: Please state your name and spell

your last name for the record.

THE WITNESS: My name is Gregory Peter Loles.

Last name is L-O-L-E-S.

THE CLERK: Thank you, sir.

DIRECT EXAMINATION

BY MR DONOVAN:

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4

that, don't you?

A. Yes, I do.

Q. And today we're only concerned about kind of

technical and specific aspects of the amount of loss?

A. I understand.

Q. Although I know there are a lot of things you want

to explain and talk about, I'm going to be asking you

some specific questions about the events and how they

led to loss. You understand?

A. Yes.

Q. Do you know St. Barbara's Church?

A. Yes, I do.

Q. Where is it located?

A. In Orange, Connecticut.

Q. What was your relationship to St. Barbara's?

A I believe in about 1994 '95 my wife and I were

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5

Q. Do you remember when you began on the Endowment

Fund?

A. I believe it was around or about 1995.

Q. How many members sit on the Endowment Fund?

A. The charter, it had to be between I think nine and

13.

Q. Did it vary during the course of your time there?

A. Sometimes.

Q. Did you sit on the Endowment Fund until the time of

your arrest?

A. Yes.

Q. When you began at the Endowment Fund, where were

the endowment fund's assets kept?

A. They were kept at a local branch of a brokerage

firm named Tucker Anthony.

Q Did there come a time when those Endowment Fund

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6

A. Yes, it was.

Q. Was it taken after some discussion?

A. Yes.

Q. Can you tell the Court why it was decided to move

the assets of the Endowment Fund to I'll call it

Pershing?

A. After seeing some of the transaction statements

from Tucker Anthony, I noticed that the Endowment Fund

was paying full retail commission for every transaction.

Q. Would they have to do that if they moved to

Pershing?

A. At Pershing, because I was an institutional client,

the transaction cost was almost nothing. Very small.

Q. All right. Now, are you familiar with -- have you

ever heard the term "day trade"?

A Yes

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Q. Now, you said that you have worked as a day trader;

is that right?

A. I day traded for myself. I never was employed as a

day trader.

Q. Did there come a time when you began assigning

certain day trades to the church?

A. Yes.

Q. And about when was that?

A. I believe, from the church statements, the first

appearance of day trade entries were in 1995. '96 for

sure.

Q. I want to explain mechanically to the Court how

this would work.

First of all, just give me an example of a day

trade, a fictitious day trade.

A Well on a given day through the day let's as an

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8

100,000 shares of IBM, average price $100. And then

they would say to me, your 100,000 shares you have also

sold today at an average price of, let's say, $101, for

example.

Q. Did your day trading suggest to you a way to make

contributions to the church without actually giving

money from your own account to the church?

A. Yes.

Q. And tell us about that?

A. Well, because now we're in the bull market of late

'96 and I'm getting more and more active in day trading,

there were many days that I had, let's say, a good day.

Q. If you had a good day, was there something that you

wanted to do?

A. When I had a good day, I decided that I would like

to put some of these completed trades into the Endowment

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Q. What would you do at the end of the day in order to

assign certain of the sales to the church?

A. Well, at the end of the day, I had to complete what

was called a blotter. And the blotter --

Q. Really briefly.

A. I would basically, if during the day there was

100,000 shares bought and 100,000 shares sold, I would

then tell DLJ, 2,000 shares, put them in the St. Barbara

account and put the 98 in my account.

Q. And was St. Barbara's endowment account ever on the

line for those trades?

A. No. The whole concept was that it was after the

trades were opened and closed that the assignment would

be made. And this is something that obviously I asked

permission from the Endowment Fund to do. I couldn't

just do it

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Q. I want to talk about how that was accounted for.

The Endowment Fund you said was a separate fund at DLJ;

is that right?

A. Well, the Endowment Fund initially had one account

at DLJ and then at some point it became two. But that

one account would get statements every month.

Q. That's the next question. Who would those

statements be sent to?

A. I would get a statement.

Q. Would anybody else?

A. And the second one would go to the then treasurer,

Peter Anastasion.

Q. Is he in court today, Peter Anastasion?

A. I believe he was here yesterday.

Q. Did St. Barbara's Endowment Fund have any kind of

financial well yearly financial reporting?

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Q. Did the day trades -- did the statements have an

income and expenditure section?

A. Yes.

Q. And were the day trades listed there?

A. They were listed under the income section.

Q. Now, while we were preparing for this sentencing

proceeding, did we request of the Court its annual

statements -- not the Court -- the church?

A. Yes.

Q. Was the church good enough to provide those for us?

A. We did get them about three months ago, I believe.

Q. And did you yourself go through the statements to

see that each year -- or most years, some years not --

most years there was listed income to the church from

your day trading?

A Yes

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12

A. Yes.

Q. All right. Were you in court yesterday when we

agreed with the church that we wouldn't introduce their

financial documents because they are kind of

confidential?

A. As they wish, yes.

Q. And you're also aware that we've gone through the

financial reports that just summarized each year that

indicates that the day trades were made; is that right?

A. Yes, I think we've tallied.

Q. I'm going to direct your attention to

Defendant's Exhibit 1 and 2. Is a portion of those

documents a listing of the day trades year by year?

A. Yes, it is.

Q. Does it appear to be accurate to you?

A It appears to be accurate

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13

just so the Court knows, this is really a summary of our

contentions.

THE COURT: I figured.

MR. DONOVAN: And at the end, after I've tried

to establish it.

BY MR. DONOVAN:

Q. I just want to make sure concerning the information

that was contained in the church reports and whether it

was accurate.

Each year, once the church began investing in

Apeiron's bond activities, would you provide a number to

the church concerning its Apeiron account?

A. Yes.

Q. And that would appear in the church financial

statements?

A In the consolidated statement that Mr Anastasion

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A. The confirmations for the day trades came directly

to him from DLJ.

Q. So that was based on the account statements of DLJ?

A. Yes.

Q. Not on anything you told him?

A. Nothing I told him.

Q. So that's with respect to the day trades.

I want to ask you a little bit later about

Mr. Nicholson's $700,000 and its relation to the day

trades, but I'll come back to that in a minute.

What I want to move on to now is, do you know

someone named Gus Boosalis?

A. Yes, I do.

Q. Do you remember when you first spoke with Gus

Boosalis, what year was it, roughly?

A I know very well It was in 2004

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Q. Tell the Judge what Father Peter told you?

A. Father Peter told me that he received a call from

him and that this man started explaining some financial

opportunity that he wanted to offer to people in the

community based on the fact that New Haven Savings Bank

was going public. And Father Peter said, and somewhere

in there he offered me that I could make money. And

then Father Peter sort of giggled because he says, I

don't know what he's talking about, but I gave him your

name.

Q. So Father Peter told you he had spoken with him and

he would be calling you?

A. Yes.

Q. And it's fair to say, is it not, that Father

Peter's virtues are spiritual and inspirational rather

than financial?

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A. Yes.

Q. Can you, in a few words, describe what that

transformation was?

A. New Haven Savings Bank decided to go public.

Q. Okay. Was it going to go public by means of one of

these initial public offerings, IPO?

A. An initial public offering.

Q. Just to jump back a second. Sorry to be

disjointed. In addition to the day trades, would you

also trade in initial public offerings?

A. Because of my trading activity, one form of

compensation a trader gets from brokerage firms that he

trades with is IPOs.

Q. What does IPO stand for?

A. Initial public offerings.

Q What is offered in an initial public offerings?

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Q. Ironically, I think today Twitter went public and

its stock is up 77 percent, but that has nothing to do

with this.

THE COURT: I thought you were going to tell

me you were well invested and you were leaving us.

BY MR. DONOVAN:

Q. Did you do IPO trades on behalf of the church as

well?

A. I was given IPOs by my brokers as, if you will,

compensation, and a number of those IPOs I assigned to

our church account.

Q. And were those also listed on the financial firm's

statements?

A. Peter actually broke those out, I think, in most

years as sort of day trades and then IPO trades.

Q And again the information concerning the IPO

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shares of the bank?

A. The board of the bank, once it makes a decision to

go public, sets a date and shareholders as of that

date -- or I should say account holders, who are the

shareholders, as of that date are then offered the

opportunity to invest in the public offering of the

bank.

Q. What is the hope of a depositor who invests in the

IPO?

A. Well, the hope of any investor would be to have a

profit on his investment.

Q. And with respect to the New Haven Savings Bank IPO,

was it widely believed that the shares on the open

market would be considerably more expensive than the

price that a depositor could buy them?

A There was very good reason to believe that yes

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qualified would be 70,000 shares at $10 a share.

Q. So if they wanted to stay to the maximum, they

would have to come up with how much?

A. $700,000.

Q. Were you yourself a depositor?

A. Unfortunately not.

Q. Was Father Peter a depositor?

A. Yes, he was.

Q. To your knowledge, did he participate in this IPO?

A. He did.

Q. Was the church a depositor?

A. Yes, it was.

Q. Did the church have many accounts at New Haven

Savings Bank?

A. Although we had many accounts, unfortunately they

were all under the same tax ID so we only had one

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A. Yes.

Q. What was it?

A. Old Financial.

Q. Where was Old Financial located?

A. It was based in Fargo.

Q. And Fargo is in South Dakota?

A. I think it 's south. South or north.

Q. One of the?

MR.McGARRY: Want to take judicial notice that

it's North Dakota, Your Honor.

BY MR. DONOVAN:

Q. And during the course of your dealings with

Mr. Boosalis and with Old Financial, did it turn out

there was a reason for it to be in that particular

state?

A Yes there was

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but did not have the money to buy those shares.

Q. Let's give an example. I had $15,000 in New Haven

Savings Bank on the day that was the cut-off date and I

want to participate in the IPO as much as I can, but I

don't have any ready cash. What was the deal that would

be offered to me?

A. What Old Financial in that situation would then be

willing to lend you up to the $700,000, assuming you

qualified for $700,000 of the stock.

Q. And what would Old Financial's -- how would it make

money?

A. They're initial documents that were presented to me

were that their compensation for this loan would be

75 percent of the profit generated by -- at the sale of

the securities.

Q Would a person who purchased the IPO be required to

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whatever they want.

Q. And was the stock also to be a security for the

loan, the stock itself?

A. And the two documents that were sent to us that a

borrower had to execute, one was, I believe it was

called a securitization document that basically said if

they default in their loan obligation, the shares can

be, I guess, the collateral. And then there was the

loan document. There were two documents that they in

ordered.

Q. All right. So in the hypothetical of impoverished

Jeremiah buying as much as he can, I would sign those

two documents and then what would happen?

A. You would sign those two documents. You would then

give them a bank account and they would send the

$700 000

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A. Most people didn't sell at the first moment, but in

the first week or 10 days eventually people sold their

stock.

Q. What would happen with the money that was made on

the sale of the stock?

A. Once the stock was sold, then one can do the

calculation as per the loan document, and most people

then returned in two transactions or two, let's say,

checks. First they returned the principal, i.e.,

$700,000, or some lesser amount if that's what they

borrowed. And then another check would be, if you will,

this negotiated interest.

Q. Now you said that originally the amount was 75/25

with Old Financial getting 75 percent?

A. Yes.

Q Did you negotiate with them in order to try to get

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A. His interest was to find people that had these

accounts.

Q. All right. And eventually what -- tell me the

activities that you engaged on behalf of Old Financial?

A. The main activity was to identify these people.

Q. After you had identified those people, how was the

proposition presented to them?

A. Well, what they were told is that -- what I would

tell them is, Number 1, if you have money, go do this

for yourself. That was my advice to everybody.

Q. Let me stop you right there. You said that the

bank was a depositor; is that right?

A. You mean the church?

Q. I'm sorry. The church was a depositor, right?

A. Yes.

Q And the church had the money to do it itself

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Q. Let me take that away. Did you talk only to church

parishioners?

A. No.

Q. Who did you talk to?

A. Well, it started with church parishioners because

that's where we would have the information that they

have an account at New Haven Savings, and then word of

mouth, other people got involved.

Q. Now, eventually do you know the total number of

people who participated?

A. Twenty-one.

Q. Twenty-one.

A. I would say 21 entities. One or two were entities

versus physical people.

Q. Now, you said that when you found out that somebody

had a New Haven Savings Bank account you would go and

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IPO once this loan was consummated. I would submit the

name of the person and his banking information to Lawyer

Frisk in Fargo.

Q. Let's stop there for one second before we move on.

Your initial conversation was Mr. Boosalis; is that

right?

A. Yes.

Q. And during the course of the month -- was it a

couple of months before the --

A. Not even. About a month and change.

Q. Did Boosalis continue to be your point person with

Old Financial?

A. There was communication with Gus Boosalis, but the

point person was clearly Attorney Frisk.

Q. About how often would you speak with him during

this period?

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Q. Did they do anything in order to check you out to

make sure that you were legitimate?

A. Yes.

Q. What did they do?

A. They came to my home.

Q. And who came?

A. I believe it was the father-in-law of Mr. Boosalis

who also, I believe, was affiliated with Old Financial.

And another gentleman.

Q. And the reason -- would it be fair to say that the

reason that they are contacting the Greek church here in

Milford is because they themselves were Greeks and

members of a Greek church in California?

A. I think that was one of the links, absolutely.

Q. There was some security in dealing with a

close knit community that tended to be trustworthy?

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Q. I mean, did the people who participated in end up

making money?

A. Yes.

Q. About how much did they make on the average?

A. A person that had to borrow the full amount,

meaning they didn't have any of their own money to

participate, after all taxes paid made approximately 40

to $42,000.

Q. And this was money that they wouldn't have made if

they hadn't gotten a loan to buy the full amount?

A. Yes.

Q. What was in this for you?

A. From that first phone call, Boosalis made it clear

that, Number 1, he's done this in multiple conversions

as these are called across the country.

Q And did he say that when he did this in various

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A. What he called the flat rate would be 15 percent.

Q. 15 percent of what?

A. Of the 75 percent, if you will.

Q. Of the transaction?

A. Which became 72 percent.

Q. Now, eventually was this 15-percent commission

calculated?

A. Yes.

Q. And how much did it come to? Well, the amount that

went to the church is not actually the amount that it

came to, right?

A. Yes. There was a couple of adjustments that had to

be made.

Q. We'll talk about those adjustments in just one

second.

How much was the amount that eventually went to the

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the church. It was no secret to him or to anyone that I

wasn't interested in this money. I was running around

because we obviously needed money for our projects.

Q. When you were explaining the deal to various New

Haven Savings Bank depositors who might participate, did

you tell them that you were entitled to a commission or

what you were planning to do with it?

A. Absolutely.

Q. That was actually a selling point?

A. It was, because I said that money will come of

this. Because they would scratch their heads, 70-some

percent. And I said, Well, but here's the good news. A

certain amount is coming from that and I will forward

that to the church.

Q. So the people who participated thought not only

would they make a certain amount of money but their

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Q. As a result, did you advise Father Peter that he

should participate in this program?

A. Absolutely.

Q. And did he?

A. Yes, he did.

Q. And do you know the total amount of gain -- we see

a $100,000 deposit with Apeiron. Was that the gain that

he enjoyed on the sale of the stock?

A. It resulted from the gain of the stock. I don't

know if there was a bit more gain. It would be odd for

it to be exactly a $100,000.

Q. Father Peter was required, was he not, to pay the

73 percent -- 72 percent?

A. All people had to pay that. Father Peter doesn't

get involved in these things, as from the beginning he

didn't

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A. By that and one other small transaction.

Q. And do you remember what the number was, that is

the amount of Father Peter's interest that you -- that

you took care of by reducing the amount of your

commission and the amount that would then go to the

church, roughly?

A. I don't know the exact amount, but by definition it

would be 72 percent of whatever profit was made.

Q. Can you make just a rough estimate?

A. If the profit was $100,000 then it would be

$72,000.

Q. And Father Peter then didn't have to pay that?

A. Father Peter didn't pay that.

Q. You said there was another small adjustment. What

was that?

A There was the daughter of another parishioner who

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and bigger, "bigger" meaning bigger size transactions, I

brought to the attention of the board that I am being

limited by the fact that I can't put a trade of a bigger

size based on what the Endowment Fund was worth, that

they had to understand that that will limit on how much

I can do.

After that meeting, Nelson said, Hum, we've got

money sitting in Pershing. Why don't you just have me

transfer money into the church's name and then you will

have what I call the band width or the capacity to put

more trades.

Q. Now, as an accounting matter, was that Nelson

Nicholson's -- was the amount $700,000?

A. It wasn't exactly 700. I don't recall. But it was

very close to $700,000.

Q And as a matter of accounting was that $700 000

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always complete before they were logged. But the way --

Q. Fair enough. And that money was also not being

used for the initial public offering trading that you

did, some of which resulted to the benefit of the

church?

A. The money simply allowed bigger transactions to

fit.

Q. So the answer is? The answer to the question is

that money wasn't being used to actually trade with?

A. No, no, no. No trades initiated in that account.

Q. Did there come a time when you had some

conversation with Boosalis -- I'm sorry -- with Frisk,

the attorney for Old Financial, concerning the number of

people that you had found who wanted to participate in

the Old Financial loan?

A When the loan amount reached $6 million which

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who were interested in participating in that loan

program?

A. As you can imagine, once the word got out, yes,

there were more people.

Q. Did you do something in order to persuade him to

increase the number and the amount of loans?

A. When he cited security as his issue, I came up with

the idea of just sort off the top of my head, I said,

Well, suppose I send you some money to hold?

Q. As security for the other people?

A. As if people run off with your loan money because I

gave it to the wrong people, I would suffer.

Q. Did you have some talk with Nelson Nicholson about

it?

A. Well, I told Nelson that I need to put up money.

And since we weren't trading it was now '04 and that

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Q. How much money did Apeiron wire?

A. I had told Frisk that I will send you a million

four, which is obviously two people's worth of money.

And he was sort of surprised and he says, So you're

confident? I said, Yeah, obviously I'm confident. No

one is going to run away with your money.

Q. So you used Apeiron sent $700,000?

A. Yes.

Q. And Nicholson's $700,000 was also sent or wired?

A. Yes, the one that was in the trading account.

Q. And as a result of that, were additional persons

allowed to get loans from Old Financial?

A. We got another $7 million for a total of 13.

Q. Even more than the $1.4 million that you had

secured?

A The 1 4 he treated as a security deposit They had

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obviously. And he wired the million four to Apeiron's,

I believe either Citibank -- to an Apeiron account.

Q. And how about Nelson Nicholson's $700,000?

A. It was all sent together.

Q. So following some time after the closing of the New

Haven Savings Bank IPO, Nelson Nicholson's $700,000 is

now sitting in the Apeiron account?

A. Obviously, with his knowledge, it is now sitting in

the Apeiron account.

Q. All right. So I want to get on to the toy company

in just a second, but let's just make sure that I've

established the numbers that I need to.

The St. Barbara's Building Fund financial statement

indicates an increase of $975,000 which it attributes to

New Haven Savings Bank stock. That's the statement

January through December of 2004

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roughly $70,000?

A. If the profit was $100,000, it was 70. And the

other person was the numbers were even smaller. So

roughly about a $100,000 I would say.

Q. Okay. Now let's talk a little bit about the toy

company.

When Nelson Nicholson first began discussing with

you the toy company, where was his $700,000 at that

point?

A. When he first introduced me to Dwyer, the owner of

the toy company, I think it was '02, '03, so it was

sitting in that trading account. We were trading at St.

Barbara.

Q. Okay. Eventually Mr. Nicholson discussed with you

making an investment with respect to the toy company?

A Yes

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moment, that's where Nelson would come in.

Q. So that $100,000 was a loan from Nelson to the

person who started the toy company?

A. It started as a loan. I think Dwyer offered I

think it was 10 percent just to make things easy. And

Nelson said okay.

Q. And you could see from their dealings that Nelson

and he had been friends from childhood?

A. Yes, yes.

Q. Was there an event that had a sort of traumatic

business experience upon the toy company?

A. Eventually the toy company needed more money,

substantially more money, Nelson, thinking he was doing

me a favor, said, Why don't do you come in, too?

Q. Did the toy company need substantially more money

because of something that had happened to one of its

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Q. Let's talk about how it was that you came about to

invest in the toy company. Was it a conversation you

had with Nelson?

A. It was just Nelson saying 10 percent. We've got

these orders. I know this guy. And it was clear that I

think he wanted me to get involved and I said okay.

Q. How much was Nelson going to invest?

A. Well, it was sort of like a demand from Dwyer.

It's what he needed. So it wasn't an investment. It

was almost -- we were lending against, in essence,

orders that Dwyer would get from the marketplace. So he

would call and say, I need 150, I need 100, I need 200.

I forget. I want to say we put initially -- and again,

the first couple of transactions was all Nelson and

eventually, because of our relationship and he wanted me

sort of around because he liked Dwyer but he also sort

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43Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/1

Documents

2LOLES Gregory Govt Supp Sentencing Memo