In an affidavit unsealed by court order Friday, an FBI agent alleged that the late Charlotte businessman Rick Siskey was operating a Ponzi scheme in which investor money was largely used to pay off other investors and to fund personal spending, including payments to casinos.
In the affidavit, an FBI agent said there was probable cause to believe that from January 2011 to December 2016 Siskey had “devised a scheme to defraud and/or obtained money by false or fraudulent pretenses,” according to the document, which was unsealed Friday after a motion to intervene by The Charlotte Observer.
Questions about Siskey emerged on Dec. 21, when a federal judge issued an order saying the SouthPark home of Siskey and his wife, Diane, may be subject to forfeiture to the U.S. government. That ruling was prompted by the agent’s sealed affidavit alleging the property had been derived from proceeds of fraud violations. The order contained no other details of the fraud allegations.
On Dec. 28, Rick Siskey, 58, committed suicide.
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The Observer on Tuesday filed a motion in federal court asking for the unsealing of documents in the case. The U.S. Attorney’s Office in Charlotte did not oppose the action except in the case of a document that included taxpayer information. On Friday, U.S. Magistrate Judge David Cayer issued an order unsealing the documents except for the one with taxpayer information.
In Charlotte since 1985, Siskey was known as the founder of financial services firm Wall Street Capitol, with which he was no longer associated at the time of his death. He also invested in start-up companies and real estate. In 1995, the Siskey YMCA in Matthews was named for the family because of a donation the couple made.
The affidavit said investigators became suspicious of Siskey’s actions as early as 2011 when the Labor Department was investigating transactions involving Siskey and two employer profit-sharing plans. Instead, Siskey settled the case, agreeing to restore about $243,000 to the plans.
The IRS criminal investigation arm, however, began a financial analysis that indicated Siskey was taking investor money but doing little actual investing, the affidavit says. Instead, he was allegedly moving money between accounts and using investor funds for personal expenses and to pay investors asking for their money to be returned, according to the affidavit.
In October 2015, law enforcement opened its investigation based on suspicion that Siskey was “co-mingling personal and business funds” in transactions involving casinos and business accounts. “Based on a review of those transactions, law enforcement suspected that Siskey was operating a ‘Ponzi’ scheme,” the affidavit says.
Thomas Walker, an attorney representing Diane Siskey, said his client is “devastated” at the loss of her husband and the “circumstances surrounding it.”
“It’s very important that everyone knows that she is fully cooperating with the federal authorities and that she is committed to putting a plan in place as soon as possible to get investors repaid,” added Walker, a former U.S. Attorney now with Alston & Bird.
Focus on TSI
The affidavit focuses on a fund called TSI Holdings that Siskey started in 2010. The Observer has previously reported that the FBI had contacted Siskey about TSI.
The affidavit said a financial analysis showed that from January 2011 to November 2015 about $31 million was invested in TSI’s account at Bank of America. About $23.5 million came from about 100 TSI investors, according to the affidavit.
During that same period, about $32 million was withdrawn from the TSI account, according to the affidavit. Of those withdrawals, $16 million was deposited into a Siskey personal account at CommunityOne Bank, now part of Capital Bank Financial. Another $10 million had been used to pay what appeared to be individual investors, the affidavit says.
Altogether, the affidavit says about $64 million was deposited in Siskey’s personal account and about $64 million withdrawn from January 2011 to November 2015.
According to the affidavit, Siskey sent over $15 million from his personal account to casinos, with about $12 million coming back in from casinos, for a net outflow of about $3 million. Information from numerous casinos showed “a pattern of extensive high stakes gambling by Siskey, to include bets of as much as $70,000 per hand,” the affidavit says.
In addition, bank records from the personal account show that more than $400,000 was paid to a local builder in 2012, whose website includes pictures of the Siskey home, including the pool and a space storing luxury autos.
Tax records list the addition of buildings in 2011 and 2012 to the property, and mortgage information showed Siskey used funds from the personal account in 2012 to make one $12,500 monthly payment on the $2.5 million interest-only home loan, the affidavit says. Normally, the mortgage payment came from another account, the affidavit says.
Other expenses paid from the personal account included more than $500,000 paid to Bentley, Mercedes-Benz and other auto dealers. Siskey had two Bentleys, a Ferrari, two Mercedes, a Corvette and a Harley Davidson motorcycle registered in his name. Agents observed 10 luxury autos in a detached garage at the Siskey residence, the affidavit says.
As of December 20, the personal account was at less than $100,000, the affidavit says.
On Dec. 12, law enforcement officials interviewed numerous TSI investors – several of whom, the affidavit says, were admittedly unsophisticated investors and several of whom were elderly. They were told Siskey would invest their money and that investments were “safe” in a “guaranteed fixed rate of return investment,” the affidavit says.
Some investors used the life insurance or retirement account proceeds of “deceased family members,” the affidavit says.
The affidavit lists a number of specific investor transactions:
▪ On Feb. 4, 2015, an unnamed investor invested $150,000 into the TSI account, while another invested $70,000. One day later, $210,000 was sent from the TSI account to the Siskey personal account, and later that day $1 million was sent from the Siskey account to the Seminole Hard Rock Resort and Casino in Hollywood, Fla., near Fort Lauderdale, according to the affidavit.
After the transfer, Siskey’s personal balance was $14,000. “Thus, it appears that Siskey is taking money intended for investment and gambling with the money,” the affidavit says.
▪ In October 2013, according to the affidavit, another investor put $600,000 into the TSI account. A day later, $500,000 was sent to the Siskey personal account, and a day after that, Siskey spent $389,500 from the personal account at Diamonds Direct for “Diane’s ring.”
On Dec. 12, according to the affidavit, authorities attempted to interview Siskey. He could not provide details of TSI’s assets and what could be used to pay back about $19 million to more than 100 investors. Soon after, Siskey ended the interview, according to the affidavit.
In the affidavit filed Dec. 21, the FBI agent said that because funds in bank accounts are easily moved “restraining orders are not sufficient to secure funds in bank accounts,” adding: “Therefore, the issuance of seizure warrants is appropriate to secure the funds identified herein for forfeiture.”
That day, Cayer, the federal judge, issued his order saying the Siskey property might be seized.
The U.S. Attorney’s Office in Charlotte and the FBI declined to comment. In a court filing this week, the U.S. Attorney’s Office said the secrecy of the affidavit was no longer necessary “to protect the confidentiality of an ongoing criminal investigation of Siskey.”