Madoff neighbor Donald Young ran $23M Ponzi scheme, SEC says

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Madoff neighbor Donald Young ran $23M Ponzi scheme, SEC says


By MEGAN V. WINSLOW
Daily News Staff Writer
Tuesday, April 21, 2009



280 Sanford Ave. in Palm Beach, owned by Donald Anthony Walker Young, is near Bernard Madoff's house. Both men are defendants in unrelated Ponzi schemes, the SEC says.

Updated 7:45 p.m. — The Securities and Exchange Commission has sued a part-time Palm Beacher and investment adviser, accusing him of running a Ponzi scheme like his former neighbor Bernard Madoff.

According to the lawsuit, Donald Anthony Walker Young, 38, stole or misappropriated more than $23 million from his investors, including withdrawing $1.9 million from one investor's account so he could buy his Sanford Avenue home for $2.1 million in 2006. The house is just down the street from Madoff's seized former home.

Neither Young nor his Washington, D.C., attorney, Paul Huey-Burns, could be reached for comment Tuesday. Phone messages left at Young's Palm Beach and Coatesville, Pa., homes were not returned by press time.

On Friday, the day the SEC filed the federal lawsuit, a U.S. District Court judge granted the SEC's motion for a temporary restraining order freezing Young's assets. The lawsuit seeks disgorgement of "ill-gotten gains" and a permanent restraining order keeping Young and his Pennsylvania investment firm, Acorn Capital Management, from violating securities law.

A spokeswoman for the U.S. Attorney's Office said Tuesday that federal prosecutors cannot confirm or deny the existence of a criminal investigation into Young or his company, but an SEC press release credits the U.S. Attorney's Office and the FBI with providing assistance with the SEC investigation.

According to the SEC's lawsuit, Young's investors bought limited partnerships in Acorn Capital's partner, Acorn II LP, which invested in publicly traded

securities.

But as president, chief investment officer, chief compliance officer, managing member and sole owner of Acorn Capital, Young possessed "complete control" over Acorn II LP funds. He misused $23 million in investor funds, including withdrawing $13 million for his personal use, according to the lawsuit.

"From 2006 to 2008, Young paid at least $11.8 million in personal expenses, including expenses related to credit cards, horse ownership and racing, construction, boats, limousines, private jet charters and other luxuries," the lawsuit says.

In April 2006, Young allegedly ordered the transfer of $1.9 million from one investor's capital account to a real estate lawyer's account in a West Palm Beach bank. A day later, Young paid cash for his $2.1 million, 3,400-square-foot vacation home on Sanford Avenue.

When investors sought to withdraw funds, Young accommodated them by taking money from other investors' capital accounts in a Ponzi-scheme fashion, and he covered up discrepancies through phony documents, the lawsuit alleges.

While the SEC believes the Acorn II LP account held only about $3 million for about 40 investors, Young has told investors through quarterly and annual statements that their balances are much higher, according to an SEC news release.

In January, the SEC conducted an examination of Acorn Capital and provided Young with written requests for business documents regarding the period between Jan. 1, 2006, and Dec. 31, 2008, but many of the requested items have not been provided, according to the lawsuit.

Young's wife, Neely Young, is listed in the lawsuit as a relief defendant, but that is because she held joint bank accounts with her husband, and she is not accused of knowing about or participating in the fraud, said David Horowitz, SEC assistant regional director.

Horowitz said many of Young's investors are from the Philadelphia area, but he could not confirm or deny whether any are from the Palm Beach.

While Madoff spent his own Palm Beach vacations at a North Lake Way mansion about a block from Young's home, the proximity of the two residences seems to be a coincidence: Horowitz said there is no known connection between Young and the 70-year-old disgraced NASDAQ chairman.