Wednesday, April 30, 2003

Fiorini auditors stumped, going for deal

By James McNair
The Cincinnati Enquirer

After three years of legal wrangling and a fruitless attempt to audit his finances, the state of Ohio's civil fraud case against promissory note peddler George Fiorini could end next month with his agreement never to sell securities again.

The deal would have to be approved by Hamilton County Common Pleas Judge Robert Ruehlman. Upon reaching an agreement with Fiorini, the Ohio Attorney General's Office will call off its long-running battle to account for the millions of dollars that Fiorini raised for himself and Guardian Investments.

"We are going to submit an entry terminating the accounting, and Mr. Fiorini has indicated that he will agree to a permanent injunction," said Kim Norris, a spokeswoman for Attorney General Jim Petro. "This is with the assumption that we can reach mutually agreeable terms."

Fiorini's lawyer, Ernest Eynon, confirmed that the two sides are in settlement negotiations. Asked about terms, he said, "I think it'll look like the preliminary injunction."

Ruehlman issued that preliminary injunction in September 2001, forbidding Fiorini from engaging in fraudulent practices, from selling promissory notes in violation of state law and from destroying documents. He also ordered the accounting of the Miami Township resident's finances.

The audit was never completed.

Fiorini originally hired an old friend to do the work, and Ruehlman rejected his two-page report outright. The judge assigned the job to the Cleveland office of Deloitte & Touche, which could not account for at least $1.1 million of the money raised by Fiorini. Deloitte & Touche said records were still missing, and when Fiorini did not provide them, Ruehlman jailed him for contempt of court. Even after Fiorini delivered more records, Deloitte & Touche said last month there were too many missing items to perform a full audit.

Guardian Investments raised $13.5 million in the late 1990s and 2000 through the sale of high-interest promissory notes, and Fiorini, a former insurance agent, sold many of those notes. Many of his customers responded to TV and magazine ads in which the late entertainer Bob Braun pitched Fiorini's 10 Percent Income Plus plan. Some sank their entire savings into the plan.

Ohio does not have a law authorizing the state to pursue restitution on behalf of securities fraud victims, so note-holders of Fiorini and Guardian are trying to recover their money through several private lawsuits plodding through federal and state courts. The Ohio legislature is now considering a bill that would add a restitution clause to state law.

Fiorini victims were shocked to learn that the state case won't result in a return of their money, but are generally too embarrassed to talk about it on the record. Their private lawyers, however, said victims gain little or nothing from Fiorini's promise not to repeat his offenses.

"Consent decrees are pretty toothless usually," said William Singer, who represents Fiorini victims in a class-action lawsuit in U.S. District Court in Cincinnati. "They don't do anything unless they call for the payment of money."

Tim Fischer, who represents a group of Guardian investors in a Hamilton County case, believes his clients face a tough road ahead. "When the state of Ohio is having this much trouble figuring how much money came in, where it went and how much is left, you can imagine how much trouble investors who have no money left are having," Fischer said.

The Fiorini-Guardian saga is stalled in two other legal maneuvers that could result in a payback to investors.

The government filed asset claims in 2001 against nine properties owned by Fiorini, but has taken no action to liquidate them. And a Guardian lawsuit to assert ownership of a medical waste disposal company is awaiting trial in federal court in Cleveland.


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