WASHINGTON -- The chairman of a California mission house was arrested yesterday on charges that he allegedly masterminded a bogus municipal bond scheme that defrauded investors out of $34 million, federal prosecutors said yesterday.
The arrest followed an announcement by the federal prosecutors office of a 45-count indictment against John Anthony Genetti, a resident of Santa Barbara and the former top official of now-defunct FSG Financial Service Inc.
Prosecutors say in the announcement that Mr. Genetti "conceived of an directed a complex racketeering and securities fraud scheme spanning six years and involving several companies created primarily for the purpose of marketing bogus municipal bonds."
With the indictment, Mr. Genetti becomes the third former FSG official to face Justice Department charges.
FSG's number two official Westley Scher was sentenced May 25 to 71 months in prison and ordered to return about $26.7 million to investors defrauded in the alleged scheme. And former FSG president Joan Kantor May 11 pleaded guilty to charges of selling bogus bonds with such "deceptively lulling names" as California Industrial Development Revenue Series A.
The indictment charges Mr. Genetti with diverting over $3 million into legitimate municipal bonds purchased for himself from Kidder, Peabody & Co. And it seeks forfeiture by Mr. Genetti of a $2.1 million home located on a private drive overlooking Mission Santa Barbara, a separate $1.1 million dollar home located next door, a 1989 Mercedes Benz convertible, a 1988 Mercedes Benz sedan, and a 1990 custom Ford Explorer.