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Do IT this week: Layering
By Phil Trexler
Beacon Journal staff writer
POSTED: 06:34 p.m. EST, Nov 03, 2009
A prominent Cuyahoga Falls investment adviser is accused of bilking friends and clients of more than $18 million.
Enrique F. Villalba also appears to be the focus of FBI agents looking into his investment practices.
Locally, Villalba has been called a miniature Bernard Madoff, the notorious Ponzi scheme operator from New York who is serving 150 years in prison for swindling clients and friends.
Villalba, 46, is named in separate lawsuits filed in Akron and in Seattle that allege he operated his own Ponzi scheme. No criminal charges have been filed.
''Everything that I have found points to sort of a Madoff kind of a deal,'' said Akron attorney Ronald Kopp, who represents two investors.
Some of the investors in Akron and Seattle recently have given interviews about their relationship with Villalba to the FBI and Security and Exchange Commission, attorneys said Tuesday.
An FBI spokesman said he could neither confirm nor deny a criminal investigation.
Villalba could not be reached for comment. A handwritten note on his Northampton Road home's front door says he no longer lives there. An attorney involved in one of his civil lawsuits did not return a call.
Villalba is listed as the principal operator of Money Market Alternative and Hybrid Money Management, both located in Beachwood. He also runs Rico Latte, a coffee-shop chain that includes a store in Hudson. A store in Stow closed over the summer.
The Washington lawsuit alleges Villalba accepted millions of dollars from his friends and clients, promising strong returns ''based on the study of physics'' as it related to the stock market.
Bath Township oilman Brooks Yarbrough and Hinckley investor Kevin Mustee filed their own lawsuit last week in Summit County Common Pleas Court claiming securities fraud and other civil claims against Villalba.
Yarbrough contends he has lost $500,000 to Villalba's companies since 2004. In April, Mustee invested $1 million. Neither man has received an investment statement since June, their lawsuit alleges. The FBI has told one of the men his investment is either ''diminished or extinguished.''
The men were friends for years with Villalba — the son of a local psychiatrist, Cuyahoga Falls High School's class president in 1981 and a West Point Academy graduate. He later graduated from the University of Puget Sound's School of Law in Tacoma, Wash., where he established more business ties.
Villalba misled his investors by claiming he was also a licensed securities dealer and adviser, the suit alleges.
''Everybody seems to trust him,'' Kopp said. ''They know him well. They're family friends. They do things together as families.
''That's the thing that I don't get. And for years and years. This isn't somebody who just flew in overnight and made a bunch of friends. This guy has been around forever and everybody trusted him.''
Similar claims are being made in U.S. District Court in Seattle, where 17 investors — again, mostly longtime friends — say investment losses surpass $17 million.
Villalba's wife, Michelle, is also listed as a defendant in that suit. The Villalbas in September filed for an uncontested divorce in Summit County.
Attorneys for the 17 investors in Washington allege Villalba's plan relied on ''financial fiction'' and that he did not actually invest their money.
Instead, he used their money for personal and business expenses, including his Rico Latte coffee shop, the suit alleges.
For about 10 years on the West Coast, Villalba supplied clients, many of whom are retirees, with in-person visits, regular e-mail updates and quarterly statements showing 22-percent investment gains, the suit contends.
It was all fiction, the investors allege.
''Instead, Villalba operated a classic Ponzi scheme,'' attorney Chris Youtz wrote in the Washington lawsuit.
Villalba's clients weren't looking for unrealistic 20 or 30 percent returns on their investment, Youtz said. Villalba promised modest 8 to 12 percent returns through more secure money-market funds.
But by using his ''proprietary momentum filter,'' Villalba would predict the best time to dip into the stock market for maximum profits, upward of 22 percent — at least on paper, Youtz said.
Over the years, investors were able to withdraw funds, when needed. At the end of the year, Villalba would send what appeared to be genuine tax forms for his clients.
''But it was all made up,'' Youtz said in a telephone interview. ''It was just an easy way for him to supposedly show the gains these people were making.''
In September, investors say, Villalba abruptly stopped taking their calls or issuing quarterly statements. They have not heard from him since.
Of the 17 plaintiffs, a Seattle woman lost $3.7 million; a Redmond, Wash., man lost $3.3 million; and a California man lost $1.1 million, the suit alleges.
The suit also cites a 1997 investment fraud case in California against Villalba in which he was held liable for $330,000 in damages to an investor.
Villalba filed for bankruptcy in 1999, but the judge denied his request to have the judgment vacated. The Washington lawsuit alleges Villalba used his investors' money to satisfy the debt.
Neither Youtz nor Kopp expressed optimism for their clients to recover their investments.
''That's the big question mark,'' Youtz said. ''What [money Villalba has], probably very little, I'm afraid. But you never really know until you go after him and see.''
Phil Trexler can be reached at 330-996-3717 or ptrexler@thebeaconjournal.com.
A prominent Cuyahoga Falls investment adviser is accused of bilking friends and clients of more than $18 million.
Enrique F. Villalba also appears to be the focus of FBI agents looking into his investment practices.
Locally, Villalba has been called a miniature Bernard Madoff, the notorious Ponzi scheme operator from New York who is serving 150 years in prison for swindling clients and friends.
Villalba, 46, is named in separate lawsuits filed in Akron and in Seattle that allege he operated his own Ponzi scheme. No criminal charges have been filed.
''Everything that I have found points to sort of a Madoff kind of a deal,'' said Akron attorney Ronald Kopp, who represents two investors.
Some of the investors in Akron and Seattle recently have given interviews about their relationship with Villalba to the FBI and Security and Exchange Commission, attorneys said Tuesday.
An FBI spokesman said he could neither confirm nor deny a criminal investigation.
Villalba could not be reached for comment. A handwritten note on his Northampton Road home's front door says he no longer lives there. An attorney involved in one of his civil lawsuits did not return a call.
Villalba is listed as the principal operator of Money Market Alternative and Hybrid Money Management, both located in Beachwood. He also runs Rico Latte, a coffee-shop chain that includes a store in Hudson. A store in Stow closed over the summer.
The Washington lawsuit alleges Villalba accepted millions of dollars from his friends and clients, promising strong returns ''based on the study of physics'' as it related to the stock market.
Bath Township oilman Brooks Yarbrough and Hinckley investor Kevin Mustee filed their own lawsuit last week in Summit County Common Pleas Court claiming securities fraud and other civil claims against Villalba.
Yarbrough contends he has lost $500,000 to Villalba's companies since 2004. In April, Mustee invested $1 million. Neither man has received an investment statement since June, their lawsuit alleges. The FBI has told one of the men his investment is either ''diminished or extinguished.''
The men were friends for years with Villalba — the son of a local psychiatrist, Cuyahoga Falls High School's class president in 1981 and a West Point Academy graduate. He later graduated from the University of Puget Sound's School of Law in Tacoma, Wash., where he established more business ties.
Villalba misled his investors by claiming he was also a licensed securities dealer and adviser, the suit alleges.
''Everybody seems to trust him,'' Kopp said. ''They know him well. They're family friends. They do things together as families.
''That's the thing that I don't get. And for years and years. This isn't somebody who just flew in overnight and made a bunch of friends. This guy has been around forever and everybody trusted him.''
Similar claims are being made in U.S. District Court in Seattle, where 17 investors — again, mostly longtime friends — say investment losses surpass $17 million.
Villalba's wife, Michelle, is also listed as a defendant in that suit. The Villalbas in September filed for an uncontested divorce in Summit County.
Attorneys for the 17 investors in Washington allege Villalba's plan relied on ''financial fiction'' and that he did not actually invest their money.
Instead, he used their money for personal and business expenses, including his Rico Latte coffee shop, the suit alleges.
For about 10 years on the West Coast, Villalba supplied clients, many of whom are retirees, with in-person visits, regular e-mail updates and quarterly statements showing 22-percent investment gains, the suit contends.
It was all fiction, the investors allege.
''Instead, Villalba operated a classic Ponzi scheme,'' attorney Chris Youtz wrote in the Washington lawsuit.
Villalba's clients weren't looking for unrealistic 20 or 30 percent returns on their investment, Youtz said. Villalba promised modest 8 to 12 percent returns through more secure money-market funds.
But by using his ''proprietary momentum filter,'' Villalba would predict the best time to dip into the stock market for maximum profits, upward of 22 percent — at least on paper, Youtz said.
Over the years, investors were able to withdraw funds, when needed. At the end of the year, Villalba would send what appeared to be genuine tax forms for his clients.
''But it was all made up,'' Youtz said in a telephone interview. ''It was just an easy way for him to supposedly show the gains these people were making.''
In September, investors say, Villalba abruptly stopped taking their calls or issuing quarterly statements. They have not heard from him since.
Of the 17 plaintiffs, a Seattle woman lost $3.7 million; a Redmond, Wash., man lost $3.3 million; and a California man lost $1.1 million, the suit alleges.
The suit also cites a 1997 investment fraud case in California against Villalba in which he was held liable for $330,000 in damages to an investor.
Villalba filed for bankruptcy in 1999, but the judge denied his request to have the judgment vacated. The Washington lawsuit alleges Villalba used his investors' money to satisfy the debt.
Neither Youtz nor Kopp expressed optimism for their clients to recover their investments.
''That's the big question mark,'' Youtz said. ''What [money Villalba has], probably very little, I'm afraid. But you never really know until you go after him and see.''
Phil Trexler can be reached at 330-996-3717 or ptrexler@thebeaconjournal.com.
Comments
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Arnoldsburg, WV
Posted 06:59 PM, 11/03/2009
I in no way condone the behanior of these greedy clowns, however his investors are just as guilty as he is, if he is. People should be smart enough to know, that anytime they get a large return on their money, someone else is getting the shaft.
Even if it's not a scam it still negatively effects others. This is why alot of companies are forced to cut cost and employees, so they can meet Wall Street's unrealistic expectations. Therefore a very few prosper and many get hurt.
I really don't think people are so naive that they don't realize this, they just simply don't care.
Arnoldsburg, WV
Posted 07:03 PM, 11/03/2009
If this guy is found guilty he should have consequences. Also, if he's guilty, so are his clients. Both he and his clients are guilty of greed.
akron , oh
Posted 08:05 PM, 11/03/2009
@ Todd65. please read the article. they invested looking for a modest return. 8-12% is not unrealistic. A few years ago CD rates could pull in 8 %.
"Villalba's clients weren't looking for unrealistic 20 or 30 percent returns on their investment, Youtz said. Villalba promised modest 8 to 12 percent returns through more secure money-market funds."
Arnoldsburg, WV
Posted 08:57 PM, 11/03/2009
last time I checked the bank 8- 12% on a money market account is preety high return, check your bank.
Arnoldsburg, WV
Posted 09:02 PM, 11/03/2009
Sorry about the typo's in last comment, I just woke up. If you think I'm wrong on Wall Street having unrealistic expectations, ask some of the public traded companies CEO'S.
Arnoldsburg, WV
Posted 09:05 PM, 11/03/2009
Alot of other countries consider 5-6% a good return, but in America everyone wants all they can get and there are negative consequences to expecting a high return.
Akron, OH
Posted 09:53 PM, 11/03/2009
I actually used to work for this guy at Rico Latte on Steels in Stow. I remember constantly he would come into the store after taking a red-eye from the West coast. The story we got was he was at "conferences for coffee". Back in 2006-07 when minimum wage increased, the staff was upset with him (some even quit) due to him not increasing wages but using tip dollars to compensate the wage increase. We all had questioned if this was legal, but having $7 an hour and being in college isn't really enough to hire a lawyer, especially when the owner would walk around exploiting his law "credentials". Karma bit him hard and I don't feel sorry for him or his greed-ridden family. What goes around comes around and I wouldn't be surprised if there were more people involved. Should have known a coffee shop won't buy you a 2008 Lexus SUV huh? Great story Phil :)
Copley, Oh
Posted 10:29 PM, 11/03/2009
I was a very loyal customer to Rico Latte before it shut down. I got to know Rico and many others that worked there. For kizzo that said "a coffee shop doesn't buy you a Lexus" you're right! That's why he had a real job too? I know from experience that this man is one of the most generous, least greedy people in the entire world. I have never seen someone donate so much of their money (schools,charities,the poor), time (St. Vincent De Paul Society and Sunday School), and product (coffee) as much as Rico. He does not deserve this, and perhaps some of you should realize that media isn't always correct.
somewhere near you, US
Posted 10:45 PM, 11/03/2009
"promising strong returns ''based on the study of physics'' as it related to the stock market."
Anyone dumb enough to buy this line deserves to be fleeced.
The bs some people buy due to greed never ceases to amaze me.
Posted 11:15 PM, 11/03/2009
He doesn't deserve this??? He defrauded his investors and stole their money. Donating stolen money does NOT make it okay and it does NOT make him a better person. He deserves exactly what he gets and I hope what he gets is a long time in prison.
Columbus, OH
Posted 11:31 PM, 11/03/2009
I used to work at Rico Latte in Stow. And at first I thought he was a pretty good guy, as he supported fair trade coffee and talked about it as being his Christian duty, but as I got to know him better I found him to be petty and dishonest. He paid his employees less than minimum wage and made a lot of promises to his staff that he couldn't keep. It looks like he was making promises to Seattle Retirees he couldn't keep as well. I think all of the donations to Walsh Jesuit were his way of luring more people in or just bolstering his own ego. The ego was strong in Rico. He was a pretty fair soccer player though, I have to give him that.
somewhere near you, US
Posted 11:42 PM, 11/03/2009
I'm not trying to slam people for their beliefs but throughout my life, the people who loudly and vigorously claimed to be religious were the ones you had to watch your back around.
Akron, OH
Posted 08:37 AM, 11/04/2009
Lulu000.... donating STOLEN money won't put you on the fast track to sainthood. Look at all the good, hard working people who work every day, some don't have enough time or don't make enough to donate their wages to churches, schools, etc. but they still wake up every day and do the right thing in their community. Sounds to me Lulu you're attempting to equate monetary donations with religious status/importance/good. What Rico did was wrong. The people involved who did nothing to stop him were wrong. Investing money and wanting results isn't a crime- STEALING money and frauding people is.
akron, oh
Posted 09:41 AM, 11/04/2009
@Todd65: "last time I checked the bank 8- 12% on a money market account is preety high return, check your bank."
Keep in mind the article stated some of the clients were involved as far back as 1997, when the market was much stronger.
akron, oh
Posted 09:45 AM, 11/04/2009
@lulu000: Very fitting moniker. Since you apparently bought into his personna you're EXACTLY the type of willing client he was preying upon. I hope you didn't lose your shirt (or blouse.)
Columbus, OH
Posted 10:31 AM, 11/04/2009
lulu: to your point about the media not always being correct, exactly which part of this story do you find to be factually inaccurate? It doesn't look like "the media" is in a smear campaign here. They're just reporting on the facts that investors have brought suit against Mr Villalba and the FBI seems to be investigating him. I think this story is for the most part pretty fair.
San Diego, CA
Posted 11:33 AM, 11/04/2009
People with money look for someone they feel they can trust to invest their money. These kind of thieves are the worst. They steal millions and even billions from unsuspecting people. Guys like Madoff should be publicly hanged for what they do.
Hudson, OH
Posted 11:49 AM, 11/04/2009
is this why Ricco Latte closed - or was it seized/shut down?
akron, oh
Posted 12:55 PM, 11/04/2009
So much for trust!!! This person knew what he was doing. So he did the crime and now he can do the time.
Posted 01:01 PM, 11/04/2009
I'm not trying to slam people for their beliefs but throughout my life, the people who loudly and vigorously claimed to be religious were the ones you had to watch your back around.
Right on "Question Authority"!!
Hudson, oh
Posted 01:49 PM, 11/04/2009
@todd65: Just 5 years ago, I was making 16% on most of my investments. In my restaurant and cleaning businesses, I expect my managers to budget the cash flow to generate the same percent. It isn't greed; it IS the american way. You seem to take issue with capitalism. Why?
Seminole, FL
Posted 07:21 PM, 11/04/2009
8-12% is an unrealistic annual return. Has been for over 10 years. Those type of returns sounds like all the garbage and sh(r)ill I hear on CNBC, basically a bunch of something ethically less than Used Car Salesmen masquerading as hedge fund managers, stock analysts and economists......
I am afraid that people are going to have to accept closer to 2-3% return. If this person is not a wizard on finance, and this article shows he isn't even close to that, then the investors have to take the losses like a man. Yeah, he'll serve time, but they'll get little back.....sorry....just my views....
Arnoldsburg, WV
Posted 07:58 PM, 11/04/2009
@luluooo, People that aren't GREEDY, don't run Ponzi schemes, WAKE UP. Even if he donated money, well he should've, it wasn't his money legally.
And far as having a real job, your correct, he was a greedy crook, running a ponzi scheme.
The media are just doing their job here, they never said he was guilty, they said there are investors bringing a law suit against him and a possible FBI investigation, so don't blame the media. If you have to blame someone then blame the investors and the FBI.
Arnoldsburg, WV
Posted 08:11 PM, 11/04/2009
@bobbabooie, Greed is the American way, I agree with that, you can call it capitalism if you like, but it's still greed. You seem to feel that you are special from the rest of society and are entilted to make all you can at other people's expense. Anyone with an ounce of common sense or ethics knows, that not everyone can get an 16% return on there investment without it negatively affecting others. The ones that do expect that type of return are greedy and have no feelings or respect for the people it negatively affects, in order to get that type of return.
akron, oh
Posted 08:34 PM, 11/04/2009
Why didn't he just sell Amway? Isn't that a legal ponzi scheme?
Hudson, oh
Posted 08:19 AM, 11/05/2009
@todd65: A you a backstabbing, bed wetting, pinko, b@stard? you sound like a commie...
