He was a high-flying investor who hung out with Miami Heat star Dwyane Wade, owned a $1.5 million Riviera yacht and lived in a $5 million waterfront house with expansive views of Biscayne Bay and the Miami skyline.
A generous booster of the University of Miami’s athletics program, he was honored by the school, which named a student lounge for him.
But today, Nevin K. Shapiro stood in faded, dark green prison scrubs, his feet shackled and his hands linked before him in steel cuffs as he pleaded guilty before a federal judge in Newark to a massive, $880 million Ponzi scheme that helped pay for it all.
Shapiro, 41, who studied criminology in college but never graduated, admitted to one count of securities fraud and one count of money laundering in a scheme that purportedly promised investors up to 26 percent returns through the buying and reselling of wholesale groceries.
He faces up to 17 years in prison when he is sentenced in January.
The former owner and chief executive officer of Capitol Investments USA Inc, Shapiro solicited millions from more than four dozen individuals between January 2005 and November 2009. Those who gave him money believed they were investing in what appeared to be a highly profitable grocery distribution business.
On paper, the profits from the bogus business were huge and he lived a lifestyle that reflected it — including the 58-foot yacht, the house and the leasing of a $200,000 Mercedes-Benz S65 AMG sports sedan.
He boasted that he gave basketball star Shaquille O’Neal a pair of diamond-studded handcuffs as a birthday gift and spent $400,000 for floor seats to Miami Heat games.
But in court today, Shapiro admitted Capitol had virtually no income generating business and simply used new investor funds to pay off existing investors — a classic Ponzi scheme.
Shapiro, well known in Miami Beach, was arrested by FBI and IRS agents in New Jersey in April. Some of his investors live in New Jersey.
The case appeared to have grown out of an involuntary bankruptcy petition last November, after those who gave substantial loans to Shapiro of up to $26 million began to get suspicious after they stopped getting payouts.
In federal bankruptcy court filings, one investor said Shapiro "repeatedly swore on his mother’s soul" that he would return the money, but needed another loan to continue the operation. In late November, the investors discovered Shapiro had moved out of his Miami Beach home and leased it, and that Capitol had closed its doors.
The filings documented fund transfers from Capital’s investors to a number of shell corporations used to cover his expenses.
In his plea before U.S. District Judge Susan D. Wigenton, Shapiro admitted the scam, which he said also helped finance more than $5 million in illegal gambling debts. He acknowledging diverting approximately $26,000 per month to cover mortgage payments on his home; another $7,250 in monthly payments on the yacht; and $4,700 per month for the lease of the Mercedes. Overall, he said he misappropriated more than $35 million in investor funds for his own personal use.
Shapiro, a major booster of the University of Miami, also admitted taking thousands of dollars from investors that he gave as donations to a school only identified in court as "a local university." He told the court he gave student athletes cash payments as high as $10,000, gifts of jewelry, and paying their bills at nightclubs and restaurants in Miami Beach.
University of Miami officials, including the school’s athletic director, did not respond to calls or e-mails seeking comment.
Shapiro’s attorney, Maria Perez, said she expects most of the investors will be made whole out of the bankruptcy, which has been selling off assets held by Shapiro and Capitol Investments.
"It’s the first step toward having some kind of closure for the victims, and for himself," she said.
U.S. Attorney Paul Fishman, who was at the plea proceeding, said the scope of the scheme made it unlikely people will get most of their money back.
"The sheer size of this Ponzi scheme underscores both the importance of vigilance on the part of investors and the significance of our continued work in pursuit of investment fraud," he said.
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