Timothy Kroll
Timothy Kroll, 44, of Solebury, was scheduled to be sentenced Tuesday for participating in a scheme with partner Carlton Cabot to defraud real estate investors by using over $17 million as a personal slush fund, and covering it up with manipulated financial statements.
But U.S. Southern District Judge Jesse M. Furman ordered that sentencing be adjourned until July 19. No reason was given, and public officials didn’t return phone calls seeking comment.
Kroll and Cabot were arrested at their homes last June, and charged with seven counts, including wire fraud, securities fraud, and money laundering. They each face up to 105 years.
Kroll pleaded guilty to all seven counts against him on Oct. 7, 2015, according to court records. He had served as chief operating officer of Cabot Investment Properties (CIP), while Cabot, 52, of Stamford, claimed the title of CEO. All told, public records show that CIP pulled in at least $240 million from hundreds of investors.
The National Law Review on June 5, 2015, referring to Cabot, asked, “Is he the worst fraudster in modern history?“
Apple Jack’s bar in Point Pleasant, P.A.
Kroll has been free on $1 million bail, and said in a recent phone interview that he still owned The Local in Point Pleasant (purchased in 2014), formerly the Apple Jack bar. Kroll would not comment on the case, although he made clear that The Local represented a new chapter in his life.
Among other charges, New York prosecutors said that Kroll spent $50,000 of investor funds on a New York City apartment, $40,000 on a credit card, and more than $22,000 toward a BMW automobile.
In an unrelated incident, Solebury police on Oct. 19, 2015, responded to a barn fire at Kroll’s five-bedroom residence at 6581 Saw Mill Road. Two Icelandic show horses perished in the blaze, along with some chickens, and the cause of the fire is still “undetermined,” according to a county fire official.
(Photo: Solebury Police Department)
With regard to Kroll’s business activity, the original complaint filed in the Southern District of New York states, “From 2003 through 2012, CIP – which was controlled by Cabot and Kroll – sponsored and oversaw approximately 18 so-called tenants-in-common (TIC) securities offerings to investors located all over the United States.” TICs are a type of a real estate investment in which investors collectively own a piece of commercial real estate, and are entitled to receive a portion of the rental income from the property.
From 2008 through 2012, say prosecutors, “Cabot and Kroll engaged in a scheme to defraud the TIC Investors by misappropriating funds belonging to the TIC Investments, and concealing their misappropriations by providing false and misleading financial reports and other information to the TIC Investors.
According to the prospectuses for the TIC Investments, CIP was only allowed to collect “excess” rental income from the TIC Investments, but Cabot and Kroll repeatedly transferred money out of bank accounts belonging to the TIC Investments and into CIP bank accounts that they controlled before the TIC Investments could use the funds to pay for operating expenses and disbursements to the TIC Investors. Cabot and Kroll, say investigators, then used these funds to pay for the following three unauthorized purposes, without the knowledge or authorization of the TIC Investors:
1) Cabot and Kroll caused millions of dollars to be transferred from the CIP Operating Accounts to the bank accounts of TIC Investments that had no available funds to cover their operating expenses and investor distributions. In this way, Cabot and Kroll were able to perpetuate the fraud scheme by propping up failing TIC Investments using funds belonging to other TIC Investments.
2) The duo used the funds in the CIP Operating Accounts belonging to the TIC Investments to pay for millions of dollars of personal expenses, including expensive cars, rental apartments, and private school tuition.
3) Cabot and Kroll used the funds in the CIP Operating Accounts belonging to the TIC Investments to pay for CIP business expenses, including an approximately $1.1M civil settlement to certain TIC Investors who had sued Cabor, Kroll, CIP, and a CIP sibsidiary.
To conceal their misappropriation of TIC Investment funds from the TIC Investors, say prosecutors, Cabot and Kroll provided false and misleading financial reports to the TIC Investors that intentionally hid the fact that CIP owed large sums of money to the TIC Investments. Kroll also gave false and misleading information to the TIC Investors about how the TIC Investment funds were managed in order to prevent the TIC Investors from learning the true financial status of their investment.
By the end of 2012, when CIP ceased its day-to-day operations, CIP and principals Cabot and Kroll owed approximately $17 million to the TIC Investments, which has never been repaid.
Investigators who ballyhooed the arrests of Kroll and Cabot had little to say Tuesday about whether victims, many retired and having lost their life savings to defaulted investments, will ever be compensated.
The United States Postal Inspection Service not respond to a query about the sentencing postponement, and an IRS spokesperson wasn’t immediately available. The normally media-savvy Manhattan U.S. Attorney Preet Bharara didn’t seem to have much to say, either.
“U.S. Southern District Judge Jesse M. Furman ordered that sentencing be adjourned until July 19.”
And . . .?