David A. Mazzeo and Michael Caruso Stole Nearly $150,000 From Investors and Lending Institutions, Falsified Documents To Evade Taxes and Loan Default.
Albany, NY - February 20, 2018 - Attorney General Eric T. Schneiderman announced the convictions after a two-week jury trial of David A. Mazzeo, 59, of Guilderland, New York, and Michael C. Caruso, 62, of Schenectady, New York, for their participation in a wide-ranging scheme to defraud investors and lending institutions. The evidence at trial showed that between July 2012 and September 2013, the two defendants engaged in a complex, quid pro quo scheme, whereby Caruso opened a personal bank account in his own name and let Mazzeo use the account to steal nearly $150,000 from multiple individuals, all while Mazzeo was under investigation for other investment fraud schemes. The pair used the money to pay themselves, to pay attorney’s fees and court-ordered restitution for Mazzeo’s prior crimes, and to pay off additional victims threatening criminal charges against Mazzeo. In exchange for Caruso’s assistance, Mazzeo assisted Caruso in drafting and obtaining numerous fake loan commitment letters to stave off lenders threatening foreclosure on Caruso’s former business, Prozone Lockers, Inc.
“The defendants engaged in an elaborate scheme to defraud investors in order to pay off previous scam victims,” said Attorney General Schneiderman. “Today’s convictions make clear that there is zero tolerance for those who seek to defraud New Yorkers. My office will continue to root out investment fraud.”
After a two-week jury trial before the Honorable Thomas A. Breslin that included the testimony of over 30 witnesses and the admission of thousands of documents into evidence, after deliberating for just three hours, an Albany County jury found both defendants guilty of all counts charged. Mazzeo and Caruso were both convicted of Money Laundering in the Second Degree (a class C felony) and Scheme to Defraud in the First Degree (a class E felony). In addition, Mazzeo was convicted of three counts of Grand Larceny in the Third Degree (a class D felony), one count of Grand Larceny in the Fourth Degree (a class E felony), one count of Securities Fraud under the Martin Act (a class E felony), one count of Offering a False Instrument for Filing in the First Degree (a class E felony), and one count of Criminal Tax Fraud in the Fourth Degree (a class E felony).
The evidence at trial showed that between July 2012 and September 2013, Mazzeo needed money to pay for his criminal defense attorney, restitution to his criminal victims and to other victims threatening additional charges, and other personal expenditures. Mazzeo was convicted in May 2012 in Fulton County of the crime of Grand Larceny in the Third Degree, and sentenced to five years’ probation. As part of his probation sentence, Mazzeo was required to make restitution payments to the victim of his Fulton County crime. Shortly after Mazzeo’s first conviction, in June 2012, Mazzeo was again charged with Grand Larceny in the Third Degree in Montgomery County, for allegedly stealing $25,000 from an individual in an investment scam. Caruso posted bail for Mazzeo in Montgomery County, signing a $50,000 bail bond on Mazzeo’s behalf. Thereafter, in August 2012, Mazzeo was indicted in Albany County and charged with Grand Larceny in the Second Degree in connection with stealing $150,000 in a real estate investment scam and diverting the money to pay off prior victims. In early 2013, Mazzeo pleaded guilty to a misdemeanor on the Montgomery County case and paid $25,000 in restitution to his victim. In February 2013, Mazzeo was convicted of felony Grand Larceny on the Albany County indictment and sentenced in April 2013 to five years’ probation, as well as ordered to pay $150,000 in restitution to his victims.
During the same time period, Caruso owned and operated a failing business, Prozone Lockers, which primarily engaged in the manufacture of lockers for college sports teams. The evidence showed that Caruso’s business had never been financially viable, and that in 2011, it began to fail. By May 2012, Caruso was facing eviction from his factory in Amsterdam, NY, and desperately needed assistance in staving off default from his three lenders in Montgomery County.
Subsequently, just three weeks after Caruso bailed Mazzeo out on the investment fraud charges in Montgomery County, on July 18, 2012, Caruso opened a personal bank account solely in his name at First Niagara Bank. He then gave Mazzeo exclusive authority over the debit card on the account, so that Mazzeo could use the account to obtain money from new investment victims and avoid detection while he was under investigation by authorities looking at him for his prior crimes. The evidence at trial proved that during the entire time Mazzeo was under investigation, he exclusively used the Caruso account to conceal his new investment fraud scheme. However, after resolving his criminal cases by guilty pleas in 2013, Mazzeo opened an account in his own name.
The evidence at trial further showed that in Mazzeo’s new scam, he approached individuals and told them he was close to securing deals in the coal or natural gas industry and just needed them to give him some money to put toward business expenditures necessary to finalize the deal. With Caruso’s assistance, Mazzeo obtained nearly $150,000 from numerous individuals for these purported energy development projects. In reality, Mazzeo and Caruso used the money entirely for personal purposes by funneling the stolen monies through Caruso’s account. These illicit transactions included payments to Mazzeo’s criminal defense attorney totaling over $20,000, restitution payments to Mazzeo’s prior victims totaling over $30,000, and payments to other individuals threatening additional criminal charges against Mazzeo. Additionally, Mazzeo made nearly $37,000 in cash withdrawals and personal expenditures in the Albany area, such as Victoria’s Secret, liquor, and tobacco products. Stolen monies funneled through the account were also used by Caruso to prop up his failing business, Prozone Lockers.
The evidence further showed that in exchange for the use of Caruso’s account, Mazzeo drafted and secured numerous phony loan commitment letters for Caruso between 2012 and 2013, which Caruso knowingly submitted to numerous lenders threatening foreclosure on his business assets and his financial demise. Those lenders, including NBT Bank and the Amsterdam Industrial Development Agency, relied on the fake commitment letters and held off Caruso’s financial demise for nearly 18 months.
The evidence at trial further showed that Mazzeo filed a false 2012 New York State personal income tax return in which he failed to report the money he had stolen, and he failed to file a 2013 New York State personal income tax return altogether, thereby evading over $4,000 in taxes on his ill-gotten gains.
Mazzeo is currently serving a sentence of 2 1/3 to 7 years in state prison for his prior fraud convictions. Caruso was remanded to the Albany County jail pending sentencing. Sentencing for both defendants is scheduled for April 12, 2018 before Honorable Thomas A. Breslin, Albany County Supreme Court.
The Attorney General’s office thanks the New York State Tax Department’s Criminal Investigations Division for its assistance on this case.
The criminal case against Mazzeo and Caruso was prosecuted by Special Counsel Benjamin S. Clark of the Criminal Enforcement and Financial Crimes Bureau, with the assistance of Legal Analyst Joseph Conniff. The Criminal Enforcement and Financial Crimes Bureau is led by Bureau Chief Stephanie Swenton and Deputy Bureau Chief Joseph D’Arrigo. The Criminal Division is led by Executive Deputy Attorney General Margaret Garnett.
The Attorney General’s investigation was conducted by Investigator Mitchell Paurowski and Deputy Chief Antoine Karam. Forensic accounting was performed by Associate Auditor Jason W. Blair. The Investigations Bureau is led by Chief Dominick Zarrella. The Forensic Audit Section is led by Chief Auditor Edward J. Keegan.