Thursday, February 14, 2013
(Last modified: 2013-02-14 08:35:58)
Source: The Blowing Rocket
A Blowing Rock man was indicted Thursday on charges of bank fraud and money laundering after allegations that he and an associate in Germany defrauded investors of more than $311 million.
Investigators believe John C. Tausche, 61, of Blowing Rock, and Helmut Kiener, 53, of Aschaffenburg, Germany, devised and directed various investment fraud schemes, according to the U.S. Attorney’s Office in Philadelphia.
Kiener, a German national, controlled several hedge funds, including K1 Global Limited and K1 Invest. Tausche controlled several offshore hedge funds collectively called the Oceanus Funds, according to the U.S. Attorney’s Office.
Between March 2005 and December 2008, Kiener allegedly created a scheme to defraud Bear Stearns by informing the New York investment company that its funds would be diversified and independently managed, according to the charges.
But Kiener actually funneled Bear Stearns’ money from K1 through the Oceanus Funds and back to K1 to give the false impression that the funds were growing and were viable investments, the indictment states.
Investigators believe that Kiener and Tausche intentionally created the appearance that the K1 funds were growing in value by providing false and misleading information to Bear Stearns.
As a result of the scheme, Kiener earned sales agent fees while Bear Stearns invested and lost about $82 million.
Bear Stearns collapsed and was sold to JP Morgan Chase in 2008.
The information filed against Tausche alleges a similar scheme against Barclays Bank that resulted in losses of $137 million to the bank.
Investigators also believe that starting in 2007, Barclays Bank, Bear Stearns and BNP Paribas invested more than $100 million with Kiener in two offshore funds called Consistent Return Ltd. and Mezzanine Financing Ltd. Kiener maintained that both were legitimate investment funds while actually directing a third party to create the funds, according to the U.S. Attorney’s Office.
Kiener then used the money for his own purchases, including an oceanfront property valued at $21 million in Delray Beach, Fla.; a Bombardier executive jet; a Bell helicopter; Bentley, Mercedes and Maybach vehicles; two luxury watercraft; and more than $8 million in upgrades to his real estate, the U.S. Attorney’s Office said.
Kiener was charged with four counts of wire fraud, two counts of bank fraud and three counts of money laundering, according to a news release.
Tausche is charged with one count of bank fraud and one count of money laundering, according to investigators.
If convicted, Kiener faces a maximum possible sentence of 200 years in prison, restitution, and a maximum fine of $7.936 million.
Tausche faces a maximum possible sentence of 40 years in prison, restitution, and a maximum fine of $1.974 million.
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