Ken Starr, financial adviser to the stars, charged with fraud

Kenneth Ira Starr, a New York investment adviser with a roster of celebrity clients, was charged by the U.S. government on Thursday of orchestrating a $30 million fraud. Andrew Stein — a onetime borough president of Manhattan and former mayoral candidate — was also named in a federal complaint that was unsealed on Thursday. According to the federal complaint, Mr. Starr allegedly used his clients' money to buy luxury items for himself, including a new $7.5 million apartment in Manhattan. The five-bedroom apartment boasts a 32-foot granite lap pool and a 1,500-square-foot garden. In addition to Hollywood bigwigs like Martin Scorsese, Wesley Snipes, and Uma Thurman, Mr. Starr's other clients included a lawyer and a hedge fund manager. He also advised Jacob Arabov, a New York jewelry store owner who was convicted in 2008 of falsifying records and making false statements in a federal investigation. Better known as “Jacob the Jeweler,” Mr. Arabov became popular in the mid-1990s among hip-hop and R&B artists, who referred to him as “the King of Bling.” The complaint alleged that Mr. Starr promised Mr. Arabov and other victims (who are not mentioned by name in the complaint) that he would invest their money in sure things. Instead, he directed their money to investments in which he had an interest or used the cash for his own purposes. Mr. Arabov and his wife, Angela, account for almost half of the money Mr. Starr is alleged to have stolen. According to the complaint, Mr. Starr acted as if he were doing the Arabovs a favor by allowing them to invest with him, and he told the couple they would reap five to 10 times their investment. The government alleges that at the meetings with the Arabovs, Mr. Stein was sometimes present, and he “expressed excitement” about investments. Mr. Arabov also asked Mr. Starr to perform auditing work for him, though no work was ever performed, the complain said. It was the Arabovs who first became suspicious of Mr. Starr when the adviser began giving them “shifting and farfetched” explanations about returns on some of their investments, according to the complaint. As a result of their suspicions, they began to record some of the conversations they had with Mr. Starr, the complaint says. In one of those conversations, Mr. Starr runs through several excuses about why they hadn't been paid yet, including something to do with a “minister” in Venuezuela who was holding up payment, the complaint says. According to the government, Ms. Arabov later complained to Mr. Starr, saying, “It's kinda not making sense anymore,” to which Mr. Starr responded, “Try being at this end of it.” He added: “We have the same interest in it, I am beyond stressed on this.” Mr. Starr allegedly told Ms. Arabov, “I love you a lot,” and “tell [Jacob] I love him.” Benjamin Brafman, a lawyer representing Mr. and Mrs. Arabov, said in an e-mailed statement: “Mr. and Mrs. Arabov unfortunately invested substantial personal assets through several prominent individuals they trusted. It is now clear that they were defrauded. Mr. and Mrs. Arabov intend to pursue all legal remedies the law provides in an effort to recover their investments.” Mr. Starr did more than handle investments for his 200 clients, the charges show. Part of Mr. Starr's business was a “family office,” serving about 200 families with taxes and bill payment. Mr. Starr employed about 70 people at his Starr & Co. LLC in Manhattan. Along with Starr Investment Advisers, the firms handled about 1,500 tax returns a year. Mr. Starr “used his access to famous and powerful clients to burnish an image of trustworthiness, leading his clients to entrust him with management and control of their financial affairs,” according to charges filed in Manhattan by a special criminal agent from the Internal Revenue Service. Occasionally, he operated as a Ponzi scheme does, prosecutors said today. “When Starr's clients made demands for payments that Starr could not meet, he transferred funds from one client to another client,” Mr. Beranger, the IRS agent, said in his complaint.