A Pleasanton man has been formally charged for his role in what investigators describe as a "massive investment fraud scheme that caused losses of more than $40 million to approximately 150 investors."
The U.S. Attorney's Office announced Wednesday that Kenneth Kenitzer, 66, has agreed to plead guilty to mail fraud and money laundering charges, which could bring up to 30 years in prison, and cooperate with the investigation.
The charges against Kenitzer come months after the arrest of business partner Anthony Vassallo, 29, of Folsom, Calif., who turned himself in to authorities back in March on multiple counts of mail fraud and money laundering. Vassallo was a 1997 graduate of Foothill High School. At that time, Kenitzer was named as being involved in the Ponzi scheme, but hadn't been formally charged.
Assistant U.S. Attorney Robin R. Taylor, who is prosecuting the case, said according to documents filed in court, Kenitzer, Vassallo and others operated Equity Investment Management and Trading, Inc. as a hedge fund investment program. Vassallo allegedly offered and sold investments, promising investors that they would make an annual return of up to 36 percent with virtually no risk of loss. The EIMT Hedge Fund investment program did not invest the money obtained as represented.
Taylor said Vassallo recruited many of the sub-fund managers and investors from his church. To keep the scheme going, she said Kenitzer, Vassallo and others in on the operation told investors that they were trading funds and showed fake financial statements as proof. When investors attempted to get their money back, Vassallo told them that the trading company contacted the Securities and Exchange Commission and the federal agency had frozen the funds in their accounts, according to court documents.
Taylor said Kenitzer, who has lived in Pleasanton for more than 30 years, is expected to appear a Sacramento courthouse shortly to enter his guilty plea. If convicted, he faces up to 20 years in prison for the mail fraud and up to 10 years for the money laundering, with fines up to twice the value of the victims' losses. The sentence will be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and will be imposed at the discretion of the court, Taylor said.