Celebrity financial adviser arrested on fraud charges

A financial adviser to celebrities including Wesley Snipes and Sylvester Stallone was arrested by federal prosecutors yesterday on charges that he carried out a $30-million fraud on his clients, using some of their money to purchase a lavish Manhattan apartment.

Kenneth Starr, 66, of Manhattan, who also is a lawyer, was charged with wire fraud, investment adviser fraud and money laundering. He was ordered held without bail at a hearing in federal court in Manhattan. A prosecutor said agents who came to arrest him found Starr hiding in a closet.

At one point in the court appearance, Starr insisted on speaking, saying: "I've always been an extremely law-abiding person. . . . I would never flee. . . . "

Assistant U.S. Attorney William J. Harrington successfully argued that Starr's behavior was that of a man who would flee, especially since millions of dollars are missing and federal sentencing guidelines would call for 25 years in prison if he is convicted.

Also arrested was former New York City Council President Andrew Stein, 65, who was charged with making false statements in a filing with the Internal Revenue Service and making false statements to a federal officer. He was released on $250,000 bail.

There's no indication Snipes or Stallone were victims, but a criminal complaint filed by the IRS said the cheated clients included a former hedge fund manager and well-known philanthropist, an actress who considered herself a longtime close friend of Starr's and a 99-year-old heiress. They were not identified by name, but Bloomberg News reported the heiress is Rachel "Bunny" Mellon, widow of philanthropist Paul Mellon.

Starr is not the same Kenneth Starr who investigated President Bill Clinton in the 1990s.- AP