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James Peister charged in $17M Ponzi scheme, officials say

This is the driveway to the St. James

This is the driveway to the St. James estate of accused Ponzi schemer James Peister, 62. Peister pleaded not guilty to the charges on June 9, 2014, and his attorney said the property on Harbor Road is in foreclosure. This photo is from June 8, 2014. Credit: Heather Walsh

An investment adviser from St. James who lived a lavish lifestyle by looting investors' cash in a $17.9 million Ponzi scheme, prosecutors say, was arrested Monday by FBI agents and jailed -- too broke to post bond.

James Peister, 62, milked his Oceanside-based North American Globex Investment Fund to buy an estate in St. James, complete with a four-car garage and eight bedrooms, as well as a Hummer vehicle and to cover other unspecified personal and business expenses, federal prosecutors said Monday.

His scheme fell apart nearly six years ago after financial markets collapsed, the economy fell into recession and people who had invested with Peister pressured him for their promised returns, Eastern District U.S. Attorney Loretta Lynch said in a statement.

"Peister's Ponzi scheme collapsed in the wake of the financial crisis in 2008, when he could no longer keep up with demands for redemptions for nervous investors," Lynch said.

Peister pleaded not guilty Monday in federal court in Central Islip to charges of securities, wire and mail fraud and was held without bail after his attorney said neither he nor his wife had any assets to secure the $1.5 million bail bond.

His attorney told U.S. District Judge Joseph Bianco that while Peister and his wife still live at the St. James estate at 108 Harbor Rd., the bank holding the mortgages has foreclosed on it, although the couple has yet to receive an eviction notice.

Tracey Gaffey, Peister's court-appointed federal public defender, urged the judge to release him on his and his wife's personal guarantee of the $1.5 million bond.

But with Peister out of money, Bianco ordered him held until he could come up with the signatures of five people who would support the bond and show personal ties to him. Without such a financial guarantee by friends or relatives, Peister would lose nothing by fleeing, Bianco said.

Peister operated the scam from January 2000 to June 2009 by promising 74 investors a 15 to 20 percent return on their collective $17.9 million investment in domestic and foreign securities, according to the indictment.

None of the victims were identified by name in the indictment, but Peister has been the target of civil suits from several former investors in state and federal courts.

According to officials, Peister sent phony statements to both investors and an independent auditor showing the fund was prospering.

In fact, he was using the money collected both to repay investors who wanted to take some of their money out, and to support his lifestyle, officials said.

One investor in Peister's fund -- Bruce Mitteldorf, of Forestville, California -- along with some of his relatives and the family's charitable trusts -- sued him in State Supreme Court in Manhattan in 2011 for the $1.1 million they entrusted to him.

Mitteldorf said the suit was settled last year for an amount that was sealed as part of the settlement agreement.

"If he broke the law, I'm fine with his being punished," Mitteldorf said.

Robert Nardoza, an Eastern District spokesman, said that if convicted of the five-count indictment, Peister faces a maximum sentence of 20 years' imprisonment on each of the securities fraud, wire fraud and mail fraud counts. He also faces a fine of up to $500,000 for securities fraud and $250,000 for each of the wire and mail fraud counts.

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