Joliet man charged in $3.5 million fraud

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Updated: January 21, 2011 4:23PM

JOLIET — A Joliet man accused of defrauding investors out of $3.5 million had acted in a mentoring role in the Joliet Township High Schools.

James Brandolino, 42, was taken into custody Tuesday by federal authorities who charged him with mail fraud and accused him of falsely reporting investment gains to clients while losing most of their money in trading and spending some of it on himself.

During the years Brandolino allegedly defrauded investors, he also had come back to his alma mater to talk to high school students about investments and even took them to the Chicago Board of Trade where he worked.

“We were very disappointed,” JTHS Superintendent Paul Swanstrom said of learning about the charges against Brandolino. Until Tuesday, the 1986 Joliet West graduate had been seen as a success story.

“He spoke at one of our honors assemblies,” Swanstrom said. “He’s been real interested in mentoring our kids.”

The website for Brandolino Investment Group, which had an office in Chicago, even displays the Joliet Township High School logo and mentions Brandolino’s involvement with students.

“Joliet Township High School students often visit CBOT (the Chicago Board of Trade) courtesy of JTHS alum, Jim Brandolino,” the site says. “Each year the students are treated to a personal tour and presentations at their school about the trading industry.”

‘Personal benefit’

Whatever Brandolino told students, a lot of what he was telling investors was not true, according to the FBI.

An FBI affidavit filed with the complaint against Brandolino says he has acknowledged falsely telling clients that they were making money in futures trading and commodity investments when they were not.

“According to Brandolino, he always told prospective investors and investors that the trading was profitable, even though often times his trading was not profitable,” says the affidavit from FBI Special Agent Brent Potter.

The FBI said Brandolino took in about $4.7 million since 2003 from 48 investors with high net worths.

“With the exception of about $1.1 million in investor redemptions,” the affidavit says, “Brandolino admitted to losing roughly half of the total invested funds since 2003 through trading and misappropriating most of the remaining funds for his own personal benefit.”

About all that is left, according to the FBI, is a 2004 BMW 745 luxury car, a Rolex watch that cost $6,000, and an interest in an unbuilt condominium in Greece that cost Brandolino more than $107,000.

Fraud allegations

The FBI has not identified Brandolino’s clients. But the complaint does refer to two unnamed investors in Shorewood who were allegedly defrauded by Brandolino from 2003 to this month.

One source said Brandolino appeared to have a number of clients from the Joliet area, many of whom would come to an annual party he would have on one of the cruise boats on Lake Michigan in Chicago.

According to the FBI, investors were told that money was being invested in futures trading accounts and a commodity pool investment.

Brandolino was registered with the National Futures Association and had trading privileges at the Chicago Board of Trade, the FBI said. He did business under different names, including Lloyd Lewis Capital Inc., Falcon Trading Group Inc. and Falcon Capital Partners LLC.

The FBI alleges that by mid-2007 Brandolino had lost much of the $1.5 million he received from investors and had misappropriated funds. But he told investors that they “had significant equity gains through 2007, even though only a small fraction of their invested funds remained on deposit with Brandolino,” according to the affidavit.

Brandolino then started a commodity pool named the Falcon Stock Index LP, which began with 10 investors, the FBI said. The fund actually earned net returns of about 15.5 percent until around July 2008, when Brandolino shut it down. However, he did not tell investors that trading had stopped and did not return their money, the FBI alleged.

“Instead, Brandolino used the invested funds to trade in his own name,” the affidavit stated. “He regularly lost money in these trades and misappropriated other invested funds for himself. Brandolino covered up the losses and misappropriations by sending bogus quarterly statements to his investors.”

By October 2010, Brandolino “had essentially no capital” but statements sent to investors at the time indicated that the fund had a balance of about $7.5 million, the affidavit said.

The charge of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. Restitution is mandatory, the FBI said.