Ohio Man Indicted for Stealing Employee 401(k) Funds and Client Investments, and Using Others’ Identities to Obtain a Home Loan

CLEVELAND - An Ohio business owner has been charged with embezzling his employees' retirement contributions and operating Ponzi and mortgage fraud schemes that mainly affected victims throughout Greater Cleveland.

A federal grand jury returned an indictment charging Seku N. Shabazz, formerly known as Jason Brooks, 54, of Cleveland, with the following:

• Embezzlement from an Employee Benefit Plan - maximum 5 years in prison.
• 7 Counts of Wire Fraud - maximum 20 years in prison per count.
• 3 Counts of Engaging in Monetary Transactions in Criminally Derived Property - maximum 10 years in prison per count.
• 2 Counts of Aggravated Identity Theft - maximum 2 years in prison.

"We will not tolerate the actions of those who obtain money from others through fraudulent schemes, " said U.S. Attorney David M. Toepfer for the Northern District of Ohio. "My office will aggressively prosecute anyone who intentionally engages in dishonest practices that rob people of their hard-earned money and ensure that they face justice."

"Mr. Shabazz abused his position to embezzle hard-earned retirement dollars from trusting employees in an organization he helped form," said FBI Cleveland Special Agent in Charge Joshua DelManzo. "His tactics not only impacted the employees of the business, but also the Ponzi scheme and investment fraud victims. The FBI will continue to pursue fraudsters who choose personal gain over faithful stewardship of the funds in their care."

"This case underscores the importance of strong oversight and accountability in protecting Ohioans' hard-earned money," said Ohio Department of Commerce Director Sherry Maxfield. "Ohioans deserve transparency, qualified professionals they can trust, and a fair, secure environment for their investments. We remain firmly committed to upholding these standards, strengthening the safeguards that keep our communities safe, and holding those individuals accountable who attempt to exploit the trust that Ohioans have placed in them."

"When those entrusted with safeguarding workers' retirement savings betray that trust for personal gain, EBSA will hold them accountable," said L. Joe Rivers, Regional Director of the Employee Benefit Security Administration, Cincinnati Regional Office. "This indictment sends a clear message that stealing employees' hard-earned 401(k) contributions is a serious federal crime, and EBSA will continue working with our law enforcement partners to protect the retirement security of American workers."

According to allegations in the indictment, Shabazz carried out a series of interrelated frauds to obtain funds from various individuals and entities. He then used the money to fund his lifestyle and maintain the illusion of success.

Shabazz was a licensed investment advisor who was the president and chief executive officer of a wealth management and financial advisory firm. Although he withheld employee retirement savings contributions, he did not remit them into the company's plan and failed to pay the required employer matching contributions. He instead used the money to make other business and personal expenditures, including to pay for his memberships to a yacht club and a private business and social club.

Once he exhausted his employees' retirement funds, Shabazz allegedly began operating an investment fraud Ponzi scheme. He solicited individuals to loan him money so he could raise capital to make mortgage loans to real estate companies, developers, and other entities. Shabazz misled and lied to investors to obtain more than $1.2 million and used the money to fund his lifestyle and at times make some payments to earlier investors and other creditors.

In yet another financial scheme, Shabazz used the identity of two individuals to give the false appearance that he controlled their company, and therefore, owned their residence. Through this misrepresentation and identity theft, he obtained a mortgage loan for over $220,000 secured by their residence and then used a portion of those funds to repay approximately $97,000 owed to the 401(k) plan participants. The owners only learned of the mortgage when they received a notice of foreclosure.

The sentence will be determined by the court after a review of factors unique to this case, including the defendant's prior criminal record, if any, his role in the offense, and the characteristics of the violations.

This investigation was conducted by the FBI Cleveland Division, the Ohio Department of Commerce-Division of Securities, and the U.S. Department of Labor-Employee Benefits Security Administration.

Assistant United States Attorney Megan R. Miller for the Northern District of Ohio is leading the prosecution.

An indictment is only a charge and is not evidence of guilt. Defendants are entitled to a fair trial in which it will be the government's burden to prove guilt beyond a reasonable doubt.

If you believe you may have been a victim in this matter, please contact the FBI Cleveland Office at 216-522-1400.