In the end, the lavish good life all came tumbling down for Kenneth Starr, the man they call the mini-Madoff.
The 66-year old money manager to the stars pled guilty in Manhattan federal court Friday to wire fraud, investment advisor fraud and money laundering.
In a plea deal worked out between the government and Starr’s lawyer Flora Edwards, Starr faces jail time between 121 and 151 months.
He is to be sentenced on Dec. 15. The plea deal, however, is non-binding and sentencing judge Shira Scheindlin could deliver a far greater or lesser time in jail to Starr.
Over the years, Starr’s client list has included Uma Thurman, Martin Scorsese, Goldie Hawn, Candice Bergen, Al Pacino, Ron Howard, Mike Nichols and Wesley Snipes, photographer Annie Leibovitz, as well as former Secretary of State Henry Kissinger and Caroline Kennedy.
Along with former New York City Council president Andy Stein, he was arrested on May 27 and remained in custody after being unable to met his $10 million bail. Stein, who was found in contempt of court earlier this week for failing to appear at a deposition on an unpaid $30,000 loan unrelated to the Starr case, has not had his day in court yet in the matter.
In 37-page criminal complaint filed in the U.S. Southern District of New York in May, IRS Special Agent Robert Beranger said that Starr “used his access to famous and powerful clients to burnish his image of trustworthiness, leading his clients to entrust him with management and control of their financial affairs alleges in court documents.”
While he didn’t steal the nearly $20 billion that Bernie Madoff did, he certainly led a high-profile lifestyle. Appearances at the prestigious Sun Valley Media Conference in 2008 as well as a very well appointed Upper East Side condo, with 32-foot lap pool and 1,500 square foot garden, were just some of the perks of his clientele — and what he did with the $20 to $50 million of it the government says he used for his own purposes.
Both the government and his lawyers have said that indicated that forfeiture and restitution amounts, which will include the Starr’s condo and reach up to $50 million, were still being negotiated.
“From 2009 to 2010,” Starr said in court Friday, “instead of using my clients’ money as I promised, I knowingly used a portion of the money for my own purposes.”
Starr’s technique was to bedazzle potential clients with high returns and the exclusivity of his services. His scheme was to put their funds in high-risk investments and, when those fell short of the expected returns, move money from one client’s account to another’s to pay off the difference.
Without her knowledge, the money manger also used $5.75 million from the account of a 100-year-old heiress Rachel “Bunny” Mellon to buy himself his luxury NYC apartment for $7.5 million. The government is still investigating other accounts used by Starr.
Dressed in prison blues, Starr admitted in court Friday that he knew it was improper to use his clients’ money for his own ends.
“Yes I did, your honor," said Starr to Judge Theodore Katz. An Internal Revenue Service investigation found that Starr was running a $30 million Ponzi scheme since 2005.
Outside the courtroom Starr’s lawyer said that her client “assumed full responsibility for his conduct.” She added that Starr knew he had “made a colossal error in judgment that he recognizes. He’s paying a very, very heavy price.”
“Kenneth Starr’s is a tale of fiction and fraud, “in which he played the role of legitimate investment adviser to a cast of unsuspecting victims,” said United States Attorney Preet Bharara in a statement released Friday,
This year’s case was not the first time Kenneth Starr got in trouble with the courts and his clients. In 2002, Sylvester Stallone sued Starr over investment advice he gave the actor about Planet Hollywood restaurant. “The Expendables” star claimed the money manager’s advice caused him to lose $10 million. The suit was eventually settled out of court.
While Stallone was not among those clients identified in the IRS criminal complaint filed this May, Starr was alleged to have cheated an actress and a former talent agency executive. The actress, who was identified in IRS documents as “Client 2,” allegedly confronted Starr last year after discovering $1 million was missing from an account of her’s he controlled.
Starr repaid Client 2 with funds from another account he ran for a Client 3. Reports indicate that Client 2 is Uma Thurman, a long-time acquaintance of Starr’s, and Client 3 is Jim Wiatt, former head of the William Morris Agency.
Neither Thurman nor Wiatt have spoken publicly about Starr or the case.