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June 18, 2010
Mystery and Millions in North Beach
By ELIZABETH LESLY STEVENS
Most mornings for more than a decade, Giuseppe Viola sat with his back against the wall in the corner of Caffe Roma in North Beach. He always wore a suit and tie, and his rosary beads were regularly on display. In small, tidy handwriting, he would track the financial markets and chart his findings on graph paper.
Caffe Roma is a convivial hub in the social life of the North Beach old guard. One regular customer, a retired longshoreman, could not resist asking Mr. Viola what he was up to with all those charts. Mr. Viola responded with a tutorial on anticipating the movements of the financial markets. There was talk of the Fibonacci system, Bollinger Bands and the Elliott wave theory.
Impressed, the longshoreman eventually gave Mr. Viola $28,000, tantalized by the prospect of annual returns of 20 percent to 25 percent. In time, friends and relatives — and scores of others — would follow.
“I was one of the first” North Beach residents to invest with Mr. Viola, the longshoreman said. “I was naïve.”
He may have been naïve, but he certainly was not alone. Mr. Viola, 59, is now accused by clients and an independent lawyer hired by the bankruptcy court in San Francisco of carrying on a Ponzi scheme that cost investors millions of dollars.
All told, Mr. Viola took in about $17 million using a trust account he set up at Citibank with a now-vanished early investor, according to the bankruptcy court attorney. San Francisco police, overwhelmed by the number of complaints, handed the case to the Federal Bureau of Investigation, which is now investigating.
“This is really a viper in the middle of North Beach who just stole zillions from those poor people,” said William McGrane, a San Francisco lawyer representing some of the investors. “It just shows you how gullible people are. It just bends your mind.”
Mr. Viola was arrested in March for skipping bail in a separate 1990 Arizona fraud case, and he is currently being held in the Maricopa County Jail in Phoenix. He had previously served five years in prison in Arizona in the 1980s, also for fraud. His name was Joseph Viola until he arrived in North Beach at some point in the mid-1990s and started calling himself Giuseppe.
Writing with a golf pencil from the jail, Mr. Viola argued that since the bankruptcy papers identify him by his original name, Joseph Viola, no “legally recognizable connection has been demonstrated.”
As details of the alleged fraud continue to surface, North Beach is abuzz with tales of the neighborhood wheeler-dealer who left pain and betrayal in his wake.
Mr. Viola was not just North Beach’s investment guru, and perhaps now its Bernie Madoff. He also had business dealings with numerous North Beach pastry shops, coffee bars and even a company that sold $100,000 kit cars made from Alfa Romeo bodies over Corvette engines. He sold five of the vehicles to a Kuwaiti diplomat who planned to present two of them to the kings of Jordan and Morocco. The kings never received their gifts, according to court documents, and the Kuwaiti government, $500,000 poorer, is among the allegedly defrauded.
The Kuwaiti Embassy in Washington did not return a call for comment.
Mr. Viola lacked the trappings of a traditional investment adviser. His office was a windowless room in the basement of a North Beach pastry shop. He shared little personal information, even with investors who thought of him as a friend.
Even now, no one knows where Mr. Viola lived.
In a sense, he lived for years in Caffe Roma, where his clients would know they could find him. On the first day of every month, they crowded into the cafe as Mr. Viola distributed a thick stack of cashier’s checks.
In January, Mr. Viola showed up at Caffe Roma as usual, but with no checks. He was changing banks, he said. Morton D. Kirsch — who had invested about $8 million with Mr. Viola in 2008 and had been trying to withdraw the last $4 million of his principal — hired a lawyer to force the liquidation of the investment fund in bankruptcy court.
Although Mr. Viola is in jail, the whereabouts of another man believed to be central to the investigation remains a mystery. That man, Ralph Napolitano, an elderly dockworker, has not been seen since shortly after he and Mr. Viola opened a joint trust account at Citibank in 1999, using Mr. Napolitano’s life savings as the initial deposit. Mr. Napolitano is not suspected of participating in the alleged fraud, said John MacConaghy, the attorney hired by the bankruptcy court to sift through the Viola case.
As an ex-convict and a fugitive, Mr. Viola lacked the identification needed to open an account on his own. So he presented a five-year-old building-access card for the Monadnock Building on Market Street, issued by a company for which there is no record, said Mr. MacConaghy. It is this Citibank trust account through which Mr. Viola funneled his investors’ money.
A Citibank spokesman said, “We do not comment on ongoing law enforcement investigations.”
The Citicorp Investment Services paperwork Mr. Viola and Mr. Napolitano filled out to open the account in May 1999 showed that Mr. Napolitano earned $25,000 a year as a mechanic at the marine terminal, and that the initial $220,000 deposited into the account, which Mr. Viola would control, constituted the dockworker’s entire net worth.
By 2006, the account had $1 million in it, Mr. MacConaghy said, “because Viola is running this Ponzi scheme.”
“Then millions are flying into the account,” he said. “By 2008, there is $9.5 million in the account. A total of $17 million flowed in, and $17 million flowed out.”
Soon after opening that account with Mr. Viola, Mr. Napolitano disappeared, Mr. MacConaghy said. Mr. Viola, until his arrest in March, continued to use Mr. Napolitano’s credit cards and cash his pension checks.
With the benefit of hindsight, people who had dealings with Mr. Viola say there were warning signs. Those coming to see Mr. Viola at the pastry shop would scoot around behind the cash register and walk down wooden steps to the basement. There, past the bakery’s ovens and food-preparation area, was a small windowless room crammed with computer terminals and television screens that Mr. Viola shared with the shop’s owners.
He told people he was from Milan, yet he spoke Italian with an American accent, said Christina Santucci, whose father grew up in Italy.
The Santuccis owned Stella Bakery on Columbus Avenue, and Ms. Santucci and her sister hired Mr. Viola — who told many people he was a lawyer — to broker its sale. Ms. Santucci then invested a sizable part of the proceeds with Mr. Viola, money that had been built up over 40 years of her family’s making and selling cakes and other treats in North Beach.
Like that of many others who had trusted Mr. Viola, Ms. Santucci’s investment is now gone.
“I don’t have the money to pay my mortgage,” she said. “My house is up for sale.”
http://www.nytimes.com/2010/06/20/us...anciscobayarea
June 18, 2010
Caffe Roma is a convivial hub in the social life of the North Beach old guard. One regular customer, a retired longshoreman, could not resist asking Mr. Viola what he was up to with all those charts. Mr. Viola responded with a tutorial on anticipating the movements of the financial markets. There was talk of the Fibonacci system, Bollinger Bands and the Elliott wave theory.
Impressed, the longshoreman eventually gave Mr. Viola $28,000, tantalized by the prospect of annual returns of 20 percent to 25 percent. In time, friends and relatives — and scores of others — would follow.
“I was one of the first” North Beach residents to invest with Mr. Viola, the longshoreman said. “I was naïve.”
He may have been naïve, but he certainly was not alone. Mr. Viola, 59, is now accused by clients and an independent lawyer hired by the bankruptcy court in San Francisco of carrying on a Ponzi scheme that cost investors millions of dollars.
All told, Mr. Viola took in about $17 million using a trust account he set up at Citibank with a now-vanished early investor, according to the bankruptcy court attorney. San Francisco police, overwhelmed by the number of complaints, handed the case to the Federal Bureau of Investigation, which is now investigating.
“This is really a viper in the middle of North Beach who just stole zillions from those poor people,” said William McGrane, a San Francisco lawyer representing some of the investors. “It just shows you how gullible people are. It just bends your mind.”
Mr. Viola was arrested in March for skipping bail in a separate 1990 Arizona fraud case, and he is currently being held in the Maricopa County Jail in Phoenix. He had previously served five years in prison in Arizona in the 1980s, also for fraud. His name was Joseph Viola until he arrived in North Beach at some point in the mid-1990s and started calling himself Giuseppe.
Writing with a golf pencil from the jail, Mr. Viola argued that since the bankruptcy papers identify him by his original name, Joseph Viola, no “legally recognizable connection has been demonstrated.”
As details of the alleged fraud continue to surface, North Beach is abuzz with tales of the neighborhood wheeler-dealer who left pain and betrayal in his wake.
Mr. Viola was not just North Beach’s investment guru, and perhaps now its Bernie Madoff. He also had business dealings with numerous North Beach pastry shops, coffee bars and even a company that sold $100,000 kit cars made from Alfa Romeo bodies over Corvette engines. He sold five of the vehicles to a Kuwaiti diplomat who planned to present two of them to the kings of Jordan and Morocco. The kings never received their gifts, according to court documents, and the Kuwaiti government, $500,000 poorer, is among the allegedly defrauded.
The Kuwaiti Embassy in Washington did not return a call for comment.
Mr. Viola lacked the trappings of a traditional investment adviser. His office was a windowless room in the basement of a North Beach pastry shop. He shared little personal information, even with investors who thought of him as a friend.
Even now, no one knows where Mr. Viola lived.
In a sense, he lived for years in Caffe Roma, where his clients would know they could find him. On the first day of every month, they crowded into the cafe as Mr. Viola distributed a thick stack of cashier’s checks.
In January, Mr. Viola showed up at Caffe Roma as usual, but with no checks. He was changing banks, he said. Morton D. Kirsch — who had invested about $8 million with Mr. Viola in 2008 and had been trying to withdraw the last $4 million of his principal — hired a lawyer to force the liquidation of the investment fund in bankruptcy court.
Although Mr. Viola is in jail, the whereabouts of another man believed to be central to the investigation remains a mystery. That man, Ralph Napolitano, an elderly dockworker, has not been seen since shortly after he and Mr. Viola opened a joint trust account at Citibank in 1999, using Mr. Napolitano’s life savings as the initial deposit. Mr. Napolitano is not suspected of participating in the alleged fraud, said John MacConaghy, the attorney hired by the bankruptcy court to sift through the Viola case.
As an ex-convict and a fugitive, Mr. Viola lacked the identification needed to open an account on his own. So he presented a five-year-old building-access card for the Monadnock Building on Market Street, issued by a company for which there is no record, said Mr. MacConaghy. It is this Citibank trust account through which Mr. Viola funneled his investors’ money.
A Citibank spokesman said, “We do not comment on ongoing law enforcement investigations.”
The Citicorp Investment Services paperwork Mr. Viola and Mr. Napolitano filled out to open the account in May 1999 showed that Mr. Napolitano earned $25,000 a year as a mechanic at the marine terminal, and that the initial $220,000 deposited into the account, which Mr. Viola would control, constituted the dockworker’s entire net worth.
By 2006, the account had $1 million in it, Mr. MacConaghy said, “because Viola is running this Ponzi scheme.”
“Then millions are flying into the account,” he said. “By 2008, there is $9.5 million in the account. A total of $17 million flowed in, and $17 million flowed out.”
Soon after opening that account with Mr. Viola, Mr. Napolitano disappeared, Mr. MacConaghy said. Mr. Viola, until his arrest in March, continued to use Mr. Napolitano’s credit cards and cash his pension checks.
With the benefit of hindsight, people who had dealings with Mr. Viola say there were warning signs. Those coming to see Mr. Viola at the pastry shop would scoot around behind the cash register and walk down wooden steps to the basement. There, past the bakery’s ovens and food-preparation area, was a small windowless room crammed with computer terminals and television screens that Mr. Viola shared with the shop’s owners.
He told people he was from Milan, yet he spoke Italian with an American accent, said Christina Santucci, whose father grew up in Italy.
The Santuccis owned Stella Bakery on Columbus Avenue, and Ms. Santucci and her sister hired Mr. Viola — who told many people he was a lawyer — to broker its sale. Ms. Santucci then invested a sizable part of the proceeds with Mr. Viola, money that had been built up over 40 years of her family’s making and selling cakes and other treats in North Beach.
Like that of many others who had trusted Mr. Viola, Ms. Santucci’s investment is now gone.
“I don’t have the money to pay my mortgage,” she said. “My house is up for sale.”