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The guilty plea was announced by Preet Bharara, U.S. attorney for the Southern District of New York.
Carlton P. Cabot, 53, of Stamford and Timothy J. Kroll, misappropriated more than $17 million of investor funds to pay for personal and business expenses, and concealed the fraud from the investors with manipulated financial statements, Bharara said.
“Carlton Cabot, CEO of Cabot Investment Properties LLC, admitted to taking over $17 million in investor funds and spending it on himself, including for private school tuition for his family and a luxury vacation apartment," Bharara said in a release. "Cabot camouflaged his fraud by doctoring financial statements and lying to his investors.”
According to the allegations in the criminal complaint and statements made in court, the fraud took place from 2003 through 2012, when Cabot and Kroll sponsored and oversaw 18 so-called tenants-in-common (“TIC”) securities offerings to investors located all over the United States.
During that time, Cabot would take monies that should have gone in to the TIC investments fund and deposited them into his company's accounts, Bharara said.
Bharara said Cabot would then use the money to cover the operating expenses and investor distributions of other TIC investments that had no available funds; to pay for millions of dollars of personal expenses, including expensive cars, rental apartments, and private school tuition, and to pay for CIP business expenses, including approximately $1,125,651 civil settlement to certain TIC investors who had sued Cabot and others.
Cabot faces up to 20 years in prison and three years of supervised release. According to the agreement with the government he also owes $17 million in restitution and forfeiture. He is scheduled to be sentenced on Sept. 15.
Kroll also pleaded guilty for his role in the scheme and is scheduled to be sentenced July 19.
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