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Salvatore Magaraci, 63, and A. Kirsten Gallardo, 60, of Huntington, NY specifically targeted elderly victims to pitch unregistered securities to for a crooked – and now defunct -- company, Acting New Jersey Attorney General Andrew J. Bruck said.
The Woodbridge Group of Companies purported to be a commercial lender that made hard-money loans secured by mortgages on commercial property. It ended up being ordered to pay $1 billion -- and saw its founder sent to federal prison for 25 years -- for defrauding 8,400 investors in a nationwide Ponzi scheme.
Neither Magaraci nor Gallardo were registered with the New Jersey Bureau of Securities, Bruck said, but that didn’t stop them from selling for Woodbridge between August 2016 and June 2017.
Magaraci even hosted the "Safe Money and Income Radio Show," which aired weekly on two New Jersey radio stations: WMTR-AM and WCTC-AM, the attorney general noted.
"Over the years, I have worked with millions and millions of dollars for my clients. Guess what? Not one of them has lost a single penny," Magaraci said during one show. "Let me say that again: Not a single client of mine has lost any of their money even during the worst market crashes since the Great Depression.”
In another episode, he asked: "Have I lost any of my clients’ money? The answer is a hundred percent positive no.”
All lies, Bruck said.
A lawsuit filed by the state Bureau of Securities in Superior Court in Hackensack cites three New Jersey victims who were told that they were making safe investments with guaranteed returns of 4.75% or more in annual interest paid out monthly.
One of the victims was 85. Another was 75. The third was 70.
The two oldest have since died.
The first victim called for information after hearing Magaraci on the radio show. That same night, Magaraci went to the man's home, offered him a contract and told him he had to sign a promissory note right away, the lawsuit alleges. The investor ponied up $300,000 to Woodbridge for what was called a First Position Commercial Mortgage (FPCM), it says.
Woodbridge, in turn, sent a $12,000 commission check to Estate Planning NJ, a Long Island company wholly owned by Gallardo, according to the suit.
Gallardo then withdrew $15,000 from the account, it says.
The second victim also contacted Magaraci after listening to the radio show, then bought a $220,000 FPCM issued by Woodbridge, the state alleges.
Magaraci also persuaded the victim to transfer the balance of an individual retirement annuity to a Woodbridge custodian and had the victim apply for a $700,000 life insurance policy with a $41,250 annual premium, the suit says.
Woodbridge sent Estate Planning NJ a $9,350 commission check for his work, Bruck noted.
Magaraci and Gallardo later got the victim to renew the $220,000 FPCM, for which another wholly owned Gallardo company, Nest Egg of Saddle Brook, collected a $8,570.83 commission, according to the state suit.
The victim didn’t receive any returns, it says.
Magaraci and Gallardo are also accused of selling the third investor a $335,500 Woodbridge FPCM based upon similar promises.
Nest Egg collected a $14,258.75 commission check from Woodbridge, and, as with the others, never fulfilled its promises, the suit says.
Woodbridge filed for Chapter 11 bankruptcy protection in December 2017. The U.S. Securities and Exchange Commission then filed a complaint in federal court in Florida alleging that Woodbridge and its related companies were using victims’ money in a Ponzi scheme.
This led to the $1 billion in penalties, disgorgement and a 25-year prison sentence for company founder Robert Shapiro.
All told, Woodbridge paid Magaraci, Gallardo, Nest Egg, and Estate Planning NJ $44,179.58 to sell the unregistered FPCMs, Bruck said.
“Their elderly investors and their estates are now left to deal with the devastating loss of their investments,” the attorney general added.
Bruck said he hopes the bureau's actions against the Long Island pair "send a strong message to businesses and individuals who think they can disregard New Jersey’s securities laws."
Meanwhile, Sean P. Neafsey, the acting director of the New Jersey Division of Consumer Affairs, reminded investors that unregistered securities "may be a red flag of fraud."
He urged investors to check with the New Jersey Bureau of Securities beforehand to verify registration information.
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