Suit alleges Ponzi scammed investors out of $300M

Cincinnati money manager Glen Galemmo ran “an elaborate Ponzi scheme” that scammed more than $300 million from about 200 in-vestors, according to a lawsuit filed against him in Hamilton County Common Pleas Court in Ohio. Between 2006 and 2011, when the S&P 500 declined, he claimed to have earned a 432% return by investing in individual stocks, according to the lawsuit, which was filed by attorney Brian P. O'Connor of Santen & Hughes, who is representing two groups of investors.

'Cookie jar'

The plaintiffs' lawsuit claims that Mr. Galemmo, his wife and his business partner, Edward Blackledge, used investor funds as “a cookie jar ... withdrawing whatever they personally needed without detection or challenge.” Mr. Galemmo's attorney, Ben Dusing of Adams Stepner Woltermann & Dusing PLLC, confirmed the existence of a continuing criminal investigation by the Internal Revenue Service and the U.S. Attorney's Office in Cincinnati. Mr. Galemmo plans to continue cooperating with federal authorities, Mr. Dusing said. “The allegations that Mr. Galemmo is fleeing the country and removing himself from the jurisdiction of the court are just not true,” Mr. Dusing said. According to the lawsuit, which was filed on July 20, irregularities surfaced in Mr. Galemmo's reporting procedures. For example, on annual K-1 forms, required for reporting each in-vestor's share of income, he chronically failed to fill out the percentage of the managed funds belonging to that investor, according to the suit. On monthly update reports, many numbers were conspicuously rounded, the suit stated. Investors were first alerted to Mr. Galemmo's potential improprieties when he sent them a mass e-mail July 17 explaining that his business would “no longer be in operation.” He also instructed investors that they wouldn't be allowed inside the building, that he had been advised by legal counsel to avoid contact with investors and that all inquiries should be directed to the IRS. “At this early stage, our goals are to uncover what money is still left, make sure that money is protected and investigate whether there are other parties who might have some liability in the case,” Mr. O'Connor said.