New Jersey Attorney Disbarred for Role in Ponzi Scheme

Attorney Matthew Marino was disbarred last month for his role in a Ponzi scheme run by his brother, a former executive of Bayou Group LLC.

The disbarment comes after a years-long suspension that has prevented Marino from practicing law for nearly six years.

Marino pled guilty to one count of misprision of a felony in 2008 after admitting he was aware of the Bayou’s Ponzi scheme and helped conceal it with bogus audits. His brother, Daniel Marino, pleaded guilty to conspiracy to commit investment adviser fraud, substantive investment adviser fraud, mail fraud, and wire fraud, resulting in a 20-year prison sentence.

Matthew Marino had been practicing law in the state of New Jersey for 20 years at the time of his suspension. He was sentenced to 21 months in prison and required to pay $60 million in restitution—equal to the amount the Bayou Group accepted in January through August of 2005, when Marino was part of the coverup.

The order calls for Marino’s name to be stricken from the roll of attorneys, permanently restraining him from practicing in the state, and requires seizure of all funds held in his name and for him to reimburse the Disciplinary Oversight Committee for costs incurred.

The Bayou Fund, LLC was established back in 2006 as a hedge fund with $1 million and an office in the basement of Samuel Israel’s home. Daniel Marino, a certified public accountant, acted as bookkeeper for the new group. Within two years, the fund had racked up major losses, according to the New Jersey Supreme Court. Daniel Marino suggested using their commissions on trades to pay investors to keep up the appearance of profit, Law360 reported.

Eventually the commissions were not enough to make up for the losses, so the Bayou fund invented an independent auditor—with Matthew Marino’s help. The Bayou founders terminated the independent accounting firm’s services and had Daniel Marino prepare a sham audit of the fund. This sham audit was performed under the name of a fictional Manhattan accounting firm, Richmond-Fairfield Associates. Monthly and quarterly reports sent to investors showed false positive rates of return, and these successful reports were used to convince potential investors of Bayou’s “proven track record.”

Matthew Marino was put in charge of developing a North Carolina office for the fund, as well as various personal errands for his brother. The leaders of the fund continued to make risky and even illegal investments, often without the knowledge of Bayou investors.

Matthew Marino was then put in charge of the “RFA office,” including picking up the mail, checking messages from Bayou investors, paying bills from the RFA checkbook, and copying fake financial statements. He even assisted his brother in setting up the accounting firm as a limited liability company.

According to court documents, Matthew Marino knew the fraud existed by January 2005. He helped his brother conceal the illegitimacy of RFA during Israel’s divorce proceedings. He also put together fake documents to prove that RFA was not tied to his brother.

Nearly 400 investors contributed $500 million into Bayou funds, and almost 290 of those investors lost over $300 million.

The Supreme Court of New Jersey Disciplinary Review Board wrote that Marino violated RPC 8.4(b) and RPC 8.4(c), constituting the commission of a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer, as well as conduct involving dishonesty, fraud, deceit, or misrepresentation.

2014-06-16T20:50:21+00:00