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Federal judge in Cleveland awards $2.4 million bonus to firm that recovered investor money from Ponzi scheme

July 30, 2018

Federal judge in Cleveland awards $2.4 million bonus to firm that recovered investor money from Ponzi scheme

CLEVELAND, Ohio — A federal judge in Cleveland awarded more than $2.4 million to a court-appointed receiver who managed “extraordinary achievements” when he and his staff clawed back millions in investments from what turned out to be a Ponzi scheme.

U.S. District Judge Christopher Boyko noted in an order last week that Mark Dottore and his staff recovered more than 100 percent of the money that people invested with Gates Mills fraudster David Dadante.

Investors sued Dadante in 2005, and Dottore and his staff managed to recover $59 million. Receivers are appointed by judges in some lawsuits to take custody of and control assets at the heart of legal disputes.

The work performed by Dottore and his staff at Dottore Companies warrants extra compensation, according to Boyko. While such a bonus is given in the “rarest of rare cases,” the judge said Dottore’s success is unprecedented.

(You can read the order here or at the bottom of this story.)

Dottore is frequently appointed by judges as a receiver in state and federal courts in Cleveland. He said he is proud of his work, which he did despite more than a decade of pushback on his decisions by some of the people whose money he sought to recover.

Many investors opposed Boyko’s decision to give a bonus even before the judge officially awarded it. Dottore and those who worked for him were paid millions through the money collected for their work — close to $9 million, by last count. The investors say any excess money should return to Dadante’s victims.

“There was a lot of financial suffering that took place for many, many years, where they didn’t have those funds,” attorney George Argie said.

Dadante told investors he knew an executive at Goldman Sachs who could set them up to purchase stock in exclusive initial public offerings. He promised annual returns of 10 to 20 percent, but used the money to buy cocaine and to make regular visits to Atlantic City casinos, authorities say.

The FBI and the Securities and Exchange Commission exposed Dadante’s scheme and he was indicted in 2006. He admitted the Goldman Sachs account did not exist and that he gave investors phony statements. He used the money collected from new investors to pay off earlier investors.

A federal judge sentenced Dadante to 13 years in federal prison in December 2007. The 64-year-old was released on June 25.

Then-U.S. District Judge Kate O’Malley appointed Dottore as receiver in 2005. Over the next several years, he recovered $59 million.

Dadante agreed to pay an $8.5 million settlement, while most of the money came from the sale of millions of shares of stock in Innotrac, a small logistics company based in Georgia.

Investors frequently clashed with Dottore throughout the recovery process, questioning the decisions he made and the hourly rates he charged. The rancor increased when Dottore and his attorney raised the possibility of receiving a bonus in 2014.

Boyko replaced O’Malley on the case when she was appointed to a federal appeals court in Washington, D.C. Boyko’s order last week was largely dismissive of the investors’ complaints.

He wrote that Dottore was “personally and physically attacked, had his reputation impugned, had numerous attempts to remove him from the case and thwart his efforts to recover for the investors.”

Still, the investors got their money back and then some, Boyko wrote.

“All due largely to the extraordinary achievements of the Receiver that many of them now seek to vilify,” his order states.

Argie represents the family of businessman Frank Regalbuto, who died in 2011. He said some investors lost homes to foreclosures and had to file for bankruptcy. Dadante charmed the wealthy builder and horse breeder into investing and convinced him recruit his wealthy friends.

“The money belongs to the participants. It’s their money, whether it’s 100 percent or 120 percent, or whatever the case might be,” Argie said.

Argie too lost money by investing with Dadante, but got it back through Dottore.

Another set of investors filed an appeal against the bonus on Friday in the 6th U.S. Circuit Court of Appeals.

Dottore and his attorney Rob Glickman said in separate interviews Monday that there has never been a recovery like the one in the Dadante case. Glickman noted that a website that tracks Ponzi schemes lists the Dadante recovery as the most successful in history.

Dottore said there are still a few million dollars he recovered that he hasn’t yet distributed to investors. He thinks the appeals court will uphold Boyko’s bonus.

“I earned every dollar,” Dottore said.

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