Feds: Congers Man Indicted for $2.7M Investment Fraud Schemes

A Congers man, whose brother was sentenced to 20 years in federal prison in July for operating a massive "pill mill" operation in Florida, has been indicted on federal charges that he scammed finanical investors out of more than $2.7 million over three years.

Stephen Colangelo Jr., 45, is accused of securities fraud and wire fraud in connection with a hedge fund and other business ventures he controlled from an office in Rockland County, including Brickell Fund, LLC. U.S. Attorney for the Southern District of New York Preet Bharara said Colangelo is charged with misleading investors and using their money for his own personal gain.

The Securities and Exchange Commission also charges that Colangelo hid his own criminal background and faked educational and financial credentials so he could pass himself off as an investment manager.

Colangelo is the brother of Vincent Colangelo, who in July was sent to prison after he pleaded guilty on April 2, 2012, to conspiracy to distribute and dispense large amounts of oxycodone without a legitimate medical purpose and outside the usual course of professional practice. Colangelo also pled guilty to money laundering and filing a false 2009 federal income tax return.

Stephen Colangelo Jr. was arrested at his Congers home after an investigation into his business dealings by the U.S. Attorney's Office and the Federal Bureau of Investigation.

“Colangelo was arrested by FBI agents today for allegedly swindling investors not once, but in two different fraudulent schemes," said Mary E. Galligan, acting assistant director in-charge of the FBI's New York office. "He reaped an estimated $2.7 million, which he used for personal expenses. These are investment schemes the FBI has seen all too often. We remain committed to investigating and apprehending those who seek to deceive investors.” 

Bharara said Colangelo billed himself as an investment manager. However, Bharara said Colangelo is accused of making false statements and representations to investors and he regularly misappropriated large amounts of investor money for his own personal benefit and to support unrelated business ventures.

The indictment charges that investors were defrauded of more than $1.6 million through Brickell Fund and that investors who were lured for what were supposed to be legitimate business ventures were defrauded out of another $1.1 million.

As Stephen Colangelo Jr. was indicted, the Secruties and Exchange Commission also filed charges against him.

The SEC complaint charges that Colangelo boasted a phony professional and educational background and hid his past criminal activities from potential investors, and he falsely claimed to have historically achieved extremely high returns buying and selling securities. Meanwhile, Colangelo siphoned off at least $1 million in investor funds to pay such unauthorized personal expenses as his federal income taxes, illegal narcotics, gambling, cigars, and travel for him and his family.

“Colangelo used blatantly false claims of investment success to lure investors to pour a substantial portion of their life savings into his numerous business and investment schemes,” said Andrew M. Calamari, director of the SEC’s New York Regional Office. “In reality they were footing the bill for his illegal activities, luxury vacations, and even his income taxes.”

According to the SEC’s complaint, Colangelo created a profile on the LinkedIn web site used for professional networking and misrepresented that he had studied finance at Nyack College from 1986 to 1989. Colangelo provided a link to his profile to potential and existing investors in one of his start-up companies. His representations to investors were false because he never attended Nyack College and has not graduated from high school, according to the SEC complaint.

In 2009, according to the SEC, Colangelo was sentenced to probation in Florida in connection with 2007 felony charges of burglary, theft and engaging in a scheme to defraud. In May 2003, Colangelo entered a pre-trial diversion program in connection with 2002 felony charges that he issued a worthless check and depsited or cashed a check with intent to defraud.

Brother in Prison

U.S. District Judge Marcia G. Cooke sentenced Vincent Colangelo to 20 years in prison, to be followed by three years of supervised release. In addition, Colangelo was ordered to forfeit five properties valued at more than $2.5 million, about $911,951 seized from seven bank accounts and a safety deposit box, 52 vehicles and vessels worth more than $6 million and jewelry valued at approximately $20,000.

The conviction arose from Operation Snake Oil, an undercover DEA investigation that began in September 2009.

Vincent Colangelo owned and operated six pain management clinics and a pharmacy in Broward and Miami-Dade counties between October 2008 and Feb. 23, 2011. Colangelo and his co-conspirators were responsible for dispensing more than 660,000 dosage units of oxycodone in amounts greater than 1.4 million milligrams and prescribing significantly more oxycodone filled by outside pharmacies to patients throughout Florida and other states.

Vincent Colangelo mass marketed his pain clinics through more than 1,600 Internet sites. Immediate cash payment was required for access to “doctor visits,” the filling of prescriptions, and for “VIP” service, which enabled patients to bypass hours of waiting and long lines for an express visit with the pain doctor.

Vincent Colangelo also directed the patients to obtain MRIs that he and his co-conspirators knew misrepresented or overstated the alleged condition and source of pain in the patients’ backs or necks. Colangelo falsified and directed his employees to falsify patients’ urine tests, which together with the false MRIs, attempted to justify the large amount of oxycodone prescribed by the clinics’ doctors.

Vincent Colangelo advertised for doctors on Craigslist and hired only doctors who agreed to prescribe maximum amounts of oxycodone and Xanax to patients. Colangelo and his co-conspirators paid “doctor shoppers” to obtain bogus MRIs and to secure prescriptions for excessive amounts of oxycodone from doctors at Colangelo’s pain clinics. The oxycodone obtained from Colangelo’s clinics was sold on the street and shipped outside Florida at a substantial profit.