Ansonia Solo Greg Stamos ()
In all, the Connecticut-based Ponzi scheme cost investors $26 million. One wealthy Greek family alone lost $14 million. But also suffering a devastating blow was an Orange church known for its charitable efforts.
Federal prosecutors say the man behind the scheme, Gregory Loles, siphoned $2.1 million from St. Barbara Greek Orthodox Church. Scholarship endowment funds created in the 1960s and worth close to $1 million were all but wiped out. The church lost another $1 million from its capital improvements account.
It was largely up to Greg Stamos, an Ansonia solo, to try to limit the damage. Stamos didn’t need much prodding to take on the case. He’s a parishioner at the church.
“I remember it like it was yesterday,” Stamos said of the moment nearly five years ago when he heard about the scam. “The priest called me, and I was at a football game, and I remember thinking right away, ‘This can’t be good.’ And it wasn’t.”
A creditor had contacted the church, saying the church owed them money, and asked why they hadn’t been paid. That raised red flags. In a matter of days, Stamos and others learned that Loles had taken money that was supposed to have been invested on behalf of St. Barbara. “I’ve been representing the church since that fateful day,” Stamos said.
Acting as general counsel for the church, though without the official title, Stamos said he and church leaders learned very quickly that the endowment and capital accounts had been depleted.
“There’s a lot of legal work that needs to be done when a corporate entity, or a church, has been the victim of a crime,” said Joseph Martini, a member of Wiggin and Dana’s White-Collar Practice Group and a former federal prosecutor who worked alongside Stamos. “An investigation typically has to be done, to figure out exactly what happened, and whose responsible for it, and to determine if you can pursue any civil recovery.”
On Feb. 22, Loles was sentenced to 25 years in federal prison.
He got his start in the financial services industry as a broker for A.G. Edwards in Hamden more than 20 years ago. But according to charging documents filed in his criminal case, Loles did not like working for commissions, preferring a fee-based earning structure. So he left and in the mid-1990s formed Apeiron Capital Management Inc.
At about the same time, records show, Loles became a member of St. Barbara. He was elected to serve on the board of the endowment fund. In that capacity, Loles used his expertise as a stockbroker and his company to purchase and sell securities on behalf of the church’s endowment fund.
He also impressed his fellow congregants. According to court records, he wined and dined church members, bragging to them about the Danbury-based race car team and Porsche sales business he owned, called Fambacher Loles Motor Sports.
At first, he was permitted to make investment decisions for the church only with the board’s collective approval. Eventually, Loles won the complete trust of those on the board. He was given the authority to trade on behalf of the endowment fund, and began to make trades on behalf of the church.
Word got out that Loles was making money for the endowment funds. As his reputation spread, some parishioners began to use his services for their own investment accounts. Loles promised a 7.5 percent return on bonds in something called Knightsbridge Holding. Trouble was, the bonds didn’t exist. Loles had been taking the investment money and pouring much of it into his race team.
All told, about a dozen families made the mistake of trusting their fellow church member. They ended up losing between $22,000 and $2.4 million.
In addition to the financial losses, church leaders worried whether they might face civil liability, or even criminal prosecution, for being somehow complicit in Loles’ scheme.
And so the church retained the two lawyers to conduct an internal investigation to determine how Loles carried out the crime. All told, the church incurred $166,425 in legal and accounting fees over a three-year period. One of the top priorities was to determine whether the church might be held responsible for the financial losses of its members.
Stamos is active in the Greek-American community around the Naugatuck Valley. He also founded the Hellenic Bar Association, which counts 55 Greek-American lawyers from throughout the state as its members. He’s run his general law practice for about 30 years, and has handled some real estate and other matters for his church over the years. He took a leading role in the legal efforts starting in 2009, when the priest called his cellphone.
“Our first priority was to do some fact-finding,” Stamos said. The church opted to contact law enforcement, and to hire a forensic accountant. “We decided to hire Joe Martini at Wiggin and Dana, because he was a former U.S. attorney, and I figured he could help coordinate my work with the FBI.
“The legal work that we did focused on if there was any civil exposure under some misguided theory that the church had endorsed Loles’ investment activities by having used his services,” Stamos said. “We were also worried about clawback issues [from lenders], especially since [Loles] had obtained lines of credit by claiming that the loans were authorized by St. Barbara, which wasn’t true.”
In the end, concerns about civil liability waned as more and more damning evidence was amassed in the criminal case against Loles. “We determined that we faced no liability,” Stamos said. “And thankfully for all, we officially deemed this horrible chapter of this terrible book closed, when he was sentenced to prison.”
At a sentencing hearing before U.S. District Judge Alvin Thompson, Assistant U.S. Attorney Michael McGarry argued that the recommended sentence in cases such as this be increased by five years because of the harm Loles had done to the congregation. The judge agreed, bringing the total to 25 years.
Court-appointed defense lawyer, Jeremiah Donovan of Old Saybrook, argued against the harsher sentence. In court documents, Donovan said not all of those who attended the church were victims. “It’s unclear whether the government contends that the term ‘victim’ embraces every parishioner of the church … or only those parishioners who contributed to the endowment fund,” he wrote in the request for a sentencing reduction.
Donovan has filed a motion asking the court to reduce the sentence. A hearing date has not yet been set. But when it is, the church, and its lawyers, Stamos and Martini, will likely be there to argue against it.
As for their efforts to recover money from Loles? The lawyers did secure a judgment in federal court. If Loles ever has any money to his name, he will have to pay the church and its lawyers $2.3 million. But his home in Easton has been foreclosed on, and prosecutors have been unable to find any retrievable assets.
“We don’t think we’ll ever see it,” Stamos said, referring to the $2.3 million. “He was like the Greek Bernie Madoff.”•