An Old Westbury investment adviser pleaded guilty Tuesday to securities and wire fraud in what federal prosecutors said was a $96 million Ponzi scheme designed to keep afloat the landmark Panoramic View Resort and Residence in Montauk.
Brian Callahan, 44, acknowledged in pleading guilty in federal court in Central Islip that he had solicited investments into mutual and hedge funds he operated but instead siphoned the money to the resort.
Among the potential victims was the Montauk Fire Department, Callahan said, which had initially invested its $600,000 scholarship fund. But department officials have said they were suspicious of Callahan's operation and pulled their money without a loss before the scheme collapsed.
Callahan faces up to 24 years and three months in prison, under the terms of a plea agreement. He also agreed to forfeit $67.4 million and make restitution to 40 victims of the fraud.
But it is not clear that he has the assets to pay the forfeiture or repay the victims.
Callahan's attorney, Michael Tremonte, declined to comment afterward, as did federal prosecutor Christopher Caffarone.
Calling the scheme, "one of the largest investment frauds in Long Island history," Eastern District United States Attorney Loretta Lynch said in a statement, "Through lies and deceit . . . [Callahan] misled investors and stole investor funds, including investments from a local fire department, to support a lavish lifestyle and operate a multimillion-dollar Ponzi scheme."
Officials are also moving to forfeit the 117-unit, historic resort, located on a scenic 10-acre beachfront property that is co-owned by Callahan and his brother-in-law, Adam Manson.
Manson, also of Old Westbury, was indicted on similar charges as Callahan in connection with the Ponzi scheme. Manson, who has pleaded not guilty, is next scheduled to appear in court in May. The two were arrested in August.
Manson's attorney, Robert Anello, declined to comment Tuesday on Callahan's plea, but said his client is "working diligently" to keep the resort open.
Manson and Callahan purchased the Panoramic View 2007, hoping to sell off the units to individual buyers as co-ops, their indictment alleged.
But they "were unsuccessful in selling" many of the units, so they started to take money from Callahan's investment funds to support the resort, the federal indictment said.
At the time, East End real estate agents suggested the poor sale of the Panoramic View co-ops was related to the high prices of the units, which were first marketed when the real estate downturn began. The resort website says units sell for as high as $6.55 million -- and monthly maintenance fees range to more than $3,200.
Federal magistrate A. Kathleen Tomlinson released Callahan on $2 million bond secured by homes owned by his sister and father, pending sentencing.