Feds: Brian Callahan, Adam Manson charged in nearly $100M Ponzi scheme

Two brothers-in-law from Old Westbury -- Brian R. Callahan and Adam J. Manson -- were arrested Thursday morning by FBI agents on a multicount indictment charging them with siphoning securities investments as part of a nearly $100-million Ponzi scheme that included the takeover of the landmark Panoramic View Hotel & Residence in Montauk.

Two brothers-in-law from Old Westbury were charged Thursday with operating a $96 million Ponzi scheme that authorities say bilked investors to retain ownership of the landmark Panoramic View Resort & Residence in Montauk.

Brian R. Callahan, 43, and Adam J. Manson, 41, each were charged in the 24-count indictment with conspiracy to commit securities and wire fraud as well as securities and wire fraud, according to Loretta E. Lynch, U.S. attorney for the Eastern District of New York. In addition, FBI agents seized $1 million in proceeds, she said.

The government also will seek to seize the historic resort, which is on a scenic 10-acre property with five buildings, 117 co-op units and three beachfront cottages, along with Callahan's home in Old Westbury and a Westhampton home owned by Manson, said Robert Nardoza, a spokesman for Lynch's office.


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"As alleged, the defendants used one of Long Island's landmarks . . . to perpetrate a wide-ranging fraud," Lynch said in a prepared statement Thursday.

At their arraignment in federal court in Central Islip Thursday, both Callahan and Manson pleaded not guilty.

Afterward, Manson's attorney, Jonathan Sack, said that neither Thursday's criminal charges, nor a civil fraud case brought against his client last year involving several of the investors, had any merit.

Callahan's attorney, Michael Tremonte, declined to comment.

Callahan, an investment adviser, raised $118 million from 40 investors between December 2006 and February 2012, saying he would place their money in the four different funds he operated that supposedly invested only in mutual and hedge funds and securities such as stocks and bonds paying high dividends, the indictment charges.

In 2007, Manson and Callahan also purchased the Panoramic View, hoping to sell off the units to individual buyers as co-ops, the indictment alleges.

But they "were unsuccessful in selling" many of the units, the indictment added, and they began to take money from Callahan's investment funds and used that money to try to keep the Panoramic View afloat.

It contends that from April 2008 to January 2012, Callahan raised millions of investors' dollars through false claims, saying he would place their money in hedge funds. Rather, the indictment claims, he actually used the money to repay existing investors, pay debts of the Panoramic View and for his personal benefit.

The indictment also claims they used the money to support a luxury lifestyle. That lifestyle, the indictment claims, included a home in Old Westbury; a beach house in Westhampton; a golf club membership for Callahan; and several luxury automobiles, including a BMW and a Range Rover.

East End real estate agents Thursday suggested a number of different factors that slowed the Panoramic View's co-op sales, including overpricing the units and starting to market them just as the real estate downturn began.

The website for the resort calls it "A Distinctive Management Property" with units selling for prices as high as $6.55 million -- and monthly maintenance fees ranging to more than $3,200.

Eventually, $96 million of the $118 million in Callahan's investment funds went into the overall Ponzi scheme, officials said.

Among the 40 investors was the Montauk Fire Department, which placed $600,000 for scholarships in one of Callahan's funds in 2008, according to the indictment. The department was lucky, Montauk Fire Chief Richard Schoen said. The department initially invested its scholarship fund, but quickly withdrew the money because "questions were raised about the vagaries of the fund."

"We got everything back," Schoen said.

Sources said people who purchased co-ops at the Panoramic View are unlikely to lose their homes even if the government seizes the property.

A number of the investors were said to be from Illinois, Kentucky, Maryland and Wisconsin, the indictment said, but were not otherwise identified.

Manson was released on a $1 million bond secured by $500,000 in equity in his father's home; Callahan was released on a $2 million bond secured by $500,000 equity in three homes owned by his sister and father.

If convicted, each faces a sentence of between 210 and 262 months in prison under federal guidelines, said federal prosecutor Christopher Caffarone.

At the resort Thursday, an employee, who identified herself as Carmen and was at the check-in desk, said the manager was not available to comment.

One guest, a Floral Park, Queens, resident who said her name was Kerry, said she was enjoying her first stay there.

"I guess our last," she said. "I guess we came at the right time. It's a shame -- beautiful place, beautiful resort. People get greedy."

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