Money Man to Stars Ran Ponzi Scheme: Feds

Stallone, Thurman, Scorsese among alleged victims

By Jonathan Dienst and Greg Wilson
|  Thursday, May 27, 2010  |  Updated 2:39 PM EDT
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A lot of big stars, including Sylvester Stallone, Martin Scorsese and Uma Thurman, are going to have to work harder after losing millions to an alleged Ponzi scheme run by a well-connected money manager.

Kenneth Starr is accused of reaping $30 million in a fraud that sources told NBC New York also emptied the wallets of Ron Howard, Caroline Kennedy, Natalie Portman, Wesley Snipes, Goldie Hawn, Henry Kissinger and Annie Leibovitz. The 65-year-old money man, no relation to the Clinton-era special prosecutor of the same name, was charged in a federal complaint along with a once powerful New York politician, Andrew Stein.

"He used his access to famous and powerful clients to burnish his image of trustworthiness, leading his clients to entrust him with management and control of their financial affairs," IRS Special Agent Robert Beranger charged in a complaint filed by the U.S. Attorney in Manhattan, which charges Starr with multiple counts of wire fraud, money laundering and lying to the IRS.

Read the complaint.

In some case, Starr collected his clients earnings, then invested their money in risky schemes or simply diverted it to himself, according to prosecutors. Starr has also been accused of giving bad advice, such as allegedly telling Snipes he didn't have to pay income taxes, which Starr has denied, and advising Leibovitz to take on a crushing $24 million loan. Stallone sued Starr in 2002 over a soured Planet Hollywood investment.

Prosecutors said that when clients demanded money, he gave them cash from other clients, which "was characteristic of a Ponzi scheme."

Last month, Starr bought a condo on Manhattan's tony Upper East Side for at least $7.5 million, using his clients' money, according to the complaint. The condo includes five bedrooms, six bathrooms a 32-foot lap pool and top of the line fixtures, prosecutors said.

Two clients, Manhattan jeweler Jacob Arabov and his wife, were allegedly cheated out of $13.9 million. Starr met the couple when he bought a $70,000 watch from the jeweler at a 2006 auction, and won them over as investors, prosecutors said.

A source familiar with the case told NBC New York Starr was able to meet some of his clients through parties thrown by Denise Rich.  Rich, a singer, is a philanthropist who is divorced from one-time fugitive billionaire Marc Rich.

Stein, a one-time City Council president and mayoral candidate in New York, is accused of making false statements to the IRS. Prosecutors say Stein worked closely with Starr in some of the risky investments made on behalf of the celebs.

Liebovitz released this statement to Gawker: "News of Ken Starr's arrest does not come as a complete surprise to me and I will follow this story with great interest. Ken Starr no longer represents me and has not for some time."

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