Jose Zollino, the former chairman of Inverworld Inc., leaded
guilty to conspiracy to commit fraud and money-laundering in a scheme in which wealthy Mexicans lost more than $300 million in 1999.
Prosecutors say that Mr. Zollino operated what amounted to a
Ponzi scheme, promising investors returns above market rates on money that was to be invested in Asia and in real-estate developments in Mexico. Mr. Zollino allegedly paid old investors with new investors' deposits.
Mr. Zollino's plea Wednesday was entered as part of an agreement with the U.S. Attorney's office in San Antonio, under which he will serve 12 years in prison. He still faces civil claims in various state and federal courts in San Antonio, as do the U.S. and Cayman Islands units of Deloitte & Touche LLP and Wells Fargo & Co. Attorneys for defrauded investors allege that the two companies abetted Mr. Zollino's money laundering and securities fraud. Both companies have denied the allegations.
Since the collapse of his firm, a world-wide hunt for Inverworld accounts has turned up just over $100 million in assets. But attorneys say their clients may yet be compensated fully if they can prove Inverworld's accountants and attorneys acted improperly and are liable for damages.
Mr. Zollino's guilty plea may strengthen those cases, said Bill Reid, an attorney with Diamond McCarthy Taylor & Finley, the Texas firm representing plaintiffs in several suits. "In the Wells Fargo litigation we have alleged that the bank was engaged in a conspiracy to launder money, which Zollino has now pleaded guilty to. In the Deloitte litigation we allege his accountants aided and abetted a massive securities fraud, to which Zollino also pleaded guilty."
On the other hand, Mr. Zollino's guilty plea may bolster the defendants' argument that a criminal defrauded them. Deloitte noted that while it hadn't seen Mr. Zollino's plea, the indictment said that he had deceived his auditors. A spokeswoman for Wells Fargo said the company doesn't comment on pending legal cases.
Write to Joel Millman at joel.millman@wsj.com
Updated May 16, 2002
