PHILADELPHIA – A gym owner-turned-investment fund manager was sentenced Tuesday to 15 years in prison for running a Ponzi scheme that left investors short $35 million once the fraud unraveled.
Joseph Forte, 53, of Broomall tried to boost his social status by accumulating wealth and pledging large gifts to private schools and charities in the Philadelphia area, both sides agree. He also spent the investments on a beach house, powerboat and private school tuition for his children.
Angry victims testified Tuesday that Forte used personal connections to gain their trust, dummied up glowing earnings reports and solicited new investments even days before his December 2008 plea in the scheme that took in $80 million.
"All of our lives, we lived well within our means and managed to accumulate $200,000 for our retirement years. ... It's gone," said Rosemarie Wilson, 57, of Chambersburg, a retired secretary who, along with her school-teacher husband, has been forced back to work.
"You destroyed many, many lives," she said.
Forte's lawyer said the former gym owner had delusions of grandeur and hoped to make his clients money.
But business savvy eluded him, just as it had when he used his mother's savings to bankroll the gym and his mother-in-law's to fund another failed venture.
Forte earned just $10,000 in 1994, about a year before he started the investment fund in his basement. By 2005, he was taking in $1.5 million from the fund. His clients included several small family foundations that made annual donations to churches, schools, hospitals and other charities in the region.
Forte tried to make a similar name for himself by giving $150,000 to $815,000 apiece to several private prep schools, including Malvern Preparatory School and Cardinal O'Hara High School. A federal receiver is now trying to get those donations back — along with excess profits paid to early investors — to repay victims.
"It wasn't a scheme when it started," Forte told the judge. "I wasn't able to do what I told people I could do right away, so I started lying."
He said he hoped to revise his trading strategies over time to achieve the promised returns of 18 to 38 percent. But the numbers — and number of investors — snowballed, making the task impossible.
"At the end, I was actively soliciting money because I was panicked," Forte told Senior U.S. District Judge Jan DuBois, who sentenced him in the middle of the federal-guideline range.
Forte, who pleaded guilty to four fraud and money laundering counts, went to authorities on Dec. 22, 2008. No investigations were under way, but as DuBois noted, "the jig was up."
Investors were clamoring for their money.
DuBois ordered Forte to report to prison on Jan. 8. He also ordered $35 million in restitution, although victims are unlikely to recoup much. The federal receiver is selling off Forte's real estate and other assets, but many are heavily leveraged.
Forte has an undergraduate degree in finance but no other credentials to operate a large investment fund, Khan said.
DuBois acknowledged that Forte was driven as much by philanthropy — and the status it would bring — as by greed.
"Unfortunately for you, you were using other people's money. That just doesn't work," DuBois said.