Investors fight for their funds

Constantino sold stock in a bank in Belize. He’s sold units in Plantation Villas, a development in a beach area along that country’s coast. There were investments in a marina and yacht club in Belize and a Georgia annuity firm, according to court records and interviews.

Missouri securities regulators warned their state’s residents in 2003 that Constantino was involved in an investment scheme. Even though he was based in Georgia, officials here didn’t issue any public warnings or sanctions involving Constantino until they arrested him in February.

It was too late for Judy Cox of Marietta, who invested more than $2.7 million with Constantino over the years. Far from being good investments, local prosecutors, regulators and a grand jury now allege, Constantino’s ventures were an illegal scheme to take investors’ money for his personal use and the use of others.

“You just couldn’t help but believe this guy,” said Cox, 83, a retired defense department worker and real estate investor. In a recent interview, Cox talked about how she gave Constantino her life savings for a variety of investments from 2002 through 2005. “I don’t have anything left.”

Constantino, 65, denies the charges, and his attorney and his wife said he’s innocent.

“This is a vendetta of one woman,” said Constantino’s wife, Sandra Newhouse, referring to Cox. “He’s a good man, and he’s so soft hearted, and he gives more than he receives. And he does not deserve this.”

Since February, when he was indicted by a grand jury, Constantino has been in the Cobb County Jail awaiting trial on charges that include securities fraud and racketeering.

His arrest came nearly six years after Missouri securities regulators ordered Constantino to stop selling questionable investments in their state; and more than two years after Cox filed a civil suit against Constantino making many of the same allegations as the Georgia criminal charges.

“Constantino is running a scheme — most likely pyramid in nature — a scam to defraud investors with allegations of sound investment opportunities,” Cox’s attorneys alleged in court papers. They said Constantino created a variety of “shell companies” — Atrium Global Partners, Atrium Secure Annuity, Atrium Investment Partners and others — to defraud investors.

Why did it take so long for Georgia securities regulators and prosecutors to take action? How many investors continued to give Constantino their money in the interim? And were any of the investments real?

They won’t say.

Officials with the Cobb County prosecutor’s office and the Georgia Secretary of State’s Securities Division said they cannot answer questions about Constantino because of the pending criminal charges.

The Constantino case is part of a growing number of securities fraud prosecutions nationwide in a year dominated by news of Bernard Madoff’s Ponzi scheme.

It appears that Constantino first ran afoul of Georgia securities regulators around 1997. That’s when they ordered him to stop selling securities in the state after misrepresenting to a customer that a $10,000 investment in a candy company was guaranteed against loss, state securities records show. In 1998, after regulators threatened further action for failure to maintain records, Constantino agreed not to apply for registration for five years.

Yet by 2002 Constantino had his Georgia securities registration back, and he was under scrutiny in Missouri, that state’s records show.

Starting in 2001, Constantino, as president of both Georgia-based Granite Financial Services and Bahamas- and Belize-based Atrium Global Partners, along with two Missouri men, was involved in a scheme to sell high-risk notes. They promised the investments were “100% safe” and would provide 12 percent to 15 percent interest paid quarterly for five years, when investors’ principal would be returned in full, Missouri records show.

Fourteen Missouri residents invested a total of $604,500 with them. They were never told that interest payments to existing investors would come from money from later investors, Missouri investigators found.

As Missouri regulators investigated throughout 2001 and 2002, they found some of the money residents had invested in one of Constantino’s firms was shifted to another of his firms. Some of it was used to repay a loan a Constantino firm has obtained “to purchase stock in a purported Belize bank.” Other funds from the investors were put into a development called “Gran Pacifica” in Nicaragua, according to Missouri investigators’ findings.

In March 2003, the Missouri Secretary of State served Constantino with a cease and desist order and around that time provided information about Constantino to Georgia securities regulators, said Missouri spokesman Ryan Hobart. Georgia Deputy Secretary of State Rob Simms said his office’s securities division has no record of any such communication, but noted that Georgia’s current securities director, Bob Terry, wasn’t appointed to the job until 2007.

Georgia investors Judy Cox and others said they were unaware of Constantino’s problems in Missouri as they were investing their money.

Cox said she hired Constantino as an estate planner in early 2002 based on a recommendation.

Cox said she and her husband, who worked at CSX railroad before he died in 1995, made money investing in real estate and living frugally over the years. (She is not related to the Cox family that owns The Atlanta Journal-Constitution.)

Between 2002 and 2005, Cox gave Constantino more than $2.7 million for a variety of investments. Cox was so confident in Constantino, she wasn’t worried when her friends started investing with him as well.

Marietta restaurateurs David Newman and Barbara Folwell, brother and sister partners in the Rib Ranch, said they invested a total of $90,000 with Constantino around 2003. Cox is the restaurant’s landlord.

Alice Williamson, who also knew Judy Cox, met Constantino at a church investment seminar, said her nephew Ben Sutton of Cleveland, Ga. Williamson invested $200,000 in 2004 in Atrium Secure Annuity, which Constantino promised would pay 9 percent interest each quarter for five years, at which time the principal would be repaid.

Sutton inherited the investment when Williamson died in November 2004 at age 86. Sutton said Constantino hasn’t paid a dividend since January 2006, and he’s been unable to get the $200,000 principal returned.

Cox said she became concerned about her investments in 2005 after Constantino stopped returning her calls. She already had been involved with one scam artist: Cox was among more than 70 people who invested millions over eight years in a Ponzi scheme run by Atlanta real estate agent Teresa Shaw, who was convicted in 2003, records show.

Cox’s 2006 lawsuit against Constantino seeking the return of her money is pending. Her attorney is former Gov. Roy Barnes. Barnes did not respond to interview requests.

Constantino filed a counterclaim alleging Cox was to blame for harming the investments by slandering him in communications with others. Constantino alleged that Cox began threatening him in July 2005 in a effort to pressure him into giving her an early return on her investments.

On Feb. 19, a Cobb County grand jury charged Constantino with racketeering, securities fraud and theft by taking for his activities involving Cox.

On June 30, Georgia insurance regulators filed an additional criminal warrant against Constantino involving annuities and insurance, accusing him of felony theft by taking, insurance fraud and exploiting the elderly. The warrant names as victims Cox and two other women, Edna Lakata and Mary Kolodziej, as well as Cox’s son, Walter Kenny Cox, and her daughter, Susan Beth Cox.

Constantino’s wife said she’s outraged by what’s happened to her husband. She said the investments were legitimate and are backed with life settlement policies, a type of investment that involves life insurance policies. “You tell me how a Ponzi scheme could be if the life settlements have been purchased?” said Newhouse.

Constantino’s supporters allege that Barnes has used his political clout to turn a civil dispute into a criminal prosecution. “Roy Barnes decided to make it criminal,” said Constantino’s criminal defense attorney, Jerry Froelich Jr. Barnes is a candidate for governor in the 2010 election.

“I believe he’s innocent,” said Froelich, but he wouldn’t discuss details of the case.

Newman and Folwell fear their money is lost.

Yet they said they continue to get letters from Constantino insisting their investments are safe. “You are probably concerned, considering recent events,” Constantino wrote Folwell on June 29. “Everything is status quo.”

Protecting your investment

● Check it out: In most cases, both the investment and the person selling it should be registered with the Securities Division at the Georgia Secretary of State office or with the federal Securities and Exchange Commission, said Bob Terry, Georgia's securities director.

“You cannot suspend even for a moment your skepticism about a potential investment, and it doesn’t matter who is offering it,” Terry said. “If you cannot afford to lose the money and smile about it, don’t invest.”

If the broker claims to be exempt from regulation, check them out anyway and ask regulators whether the investment really is exempt — it often isn’t. Two places to start:

FINRA Broker Check: The Financial Industry Regulatory Authority, an independent regulator of securities firms doing business in the U.S., maintains an online database on registration and licensing information on brokers and securities firms. Go online or call 1-800-289-9999.

Georgia Securities Division: To check whether a broker or investment is registered in Georgia, call 404-656-3920.

● References aren't enough: Investment schemes often spread based on the personal endorsements of early victims, experts said. Con artists often exploit common religious, civic or social bonds, said Fred Joseph, president of the North American Securities Administrators Association and Colorado's securities commissioner.

● Beware foreign investments: "Just don't do it," said Terry. "There's not a way to do any meaningful due diligence."

● Know the red flags: Warning signs of a scam include promises of unusually high returns, claims of low- or no-risk investments, and sellers pressuring for a quick investment claiming the deal is about to go away. If you are thinking about putting money in a creative venture, run it through FINRA's Scam Meter.

● Report potential scams: To file a complaint about questionable investments or the activities of brokers with the Georgia Securities Division, or call 404-656-3920.

Got a tip?

Do you suspect a consumer rip-off, government waste or a threat to public safety? Tell us what you want investigated. E-mail Spotlight or call 404-526-5041.