SEC v. Nevin K. Shapiro, No. 1:10-CV-21281, Southern District of Florida (Apr. 21, 2010) — Complaint

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

CASE NO.

SECURITIES AND EXCHANGE COMMISSION, )
)
   Plaintiff, )
v. )

 )

NEVIN            K.            SHAPIRO,            )

)

   Defendant. )

_______________________________________________  )

COMPLAINT
Plaintiff Securities and Exchange Commission alleges as follows:
I. INTRODUCTION
1.  The  Commission  brings  this  action  to  enjoin  Defendant  Nevin  K.  Shapiro  from
violating the anti-fraud provisions of the federal securities laws.
2. From no later than February 2003 until at least November 2009, Shapiro, directly
and  through  his  company  Capitol  Investments  USA,  Inc.,  operated  an  offering  fraud  that,  by
January  2005,  devolved  into  a  massive  Ponzi  scheme.    All  told,  Shapiro  raised  approximately
$900 million from investors through these fraudulent schemes.
3.  Shapiro  solicited  investments  for  Capitol  primarily  during  personal  discussions,
where he promised to refund prospective investors’ principal within thirty days and pay 10% to
26% annual returns on their investment.  Shapiro told prospective investors this was a risk-free
investment  in  Capitol’s  grocery  business  and  touted  Capitol’s  financial  success  as  well  as  his
own.  Shapiro assured prospective investors Capitol’s purchase contracts and accounts receivable
secured their investments.

4.  In  reality,  Shapiro  misappropriated  at  least  $38  million  of  investor  contributions
to finance his lavish lifestyle and fund unrelated personal business ventures.
5.  By  late  2004,  Capitol  was  operating  at  a  loss.    From  2005  though  late  2009,
Capitol  had  almost  no  business  operations.    To  hide  this  from  investors,  Shapiro  merely  repaid
earlier investors with approximately $769 million collected from new investors in typical Ponzi
scheme fashion.
6. Through the conduct set forth above and described in more detail below, Shapiro
violated  Section  17(a)  of  the  Securities  Act  of  1933  (“Securities  Act”)  [15  U.S.C.  §  77q(a)],
Section  10(b)  and  Rule  10b-5  of  the  Securities  Exchange  Act  of  1934  (“Exchange  Act”)  [15
U.S.C. § 78j(b) and 17 C.F.R. §240.10b-5].
7.  The  Commission  asks  the  Court  to  enter:  (1)  a  permanent  injunction  restraining
and enjoining Shapiro from violating the federal securities laws; (2) an order directing Shapiro to
submit  a  sworn  accounting  and  disgorge  all  ill-gotten  gains,  with  prejudgment  interest;  and  (3)
an order directing Shapiro to pay civil penalties.
II. DEFENDANT AND RELATED PARTY
A. Defendant
8.  Shapiro,  41,  resides  in  Miami  Beach,  Florida.    He  was  Capitol’s  founder,  sole
shareholder,  president,  and  CEO.    Shapiro  controlled  all  aspects  of  Capitol’s  business  and
fundraising  efforts.    He  met  with  investors  on  Capitol’s  behalf  and  signed  promissory  notes,
personal guarantees and joint venture agreements, and approved payments to investors.
B. Related Entity
9.  Capitol  is  a  Florida  corporation  formed  in  1998  with  its  principal  place  of
business  in  Miami  Beach.    Capitol  was  a  grocery  diverter  and  food  broker.   Grocery  diverters
2

purchase lower-priced groceries from vendors in one region of the country and resell them for a
profit  to  buyers  in  another  region  where  prices  are  higher.    Capitol  has  never  registered  an
offering or class of securities under the Securities Act or the Exchange Act.  On November 30,
2009, a group of investors filed an involuntary bankruptcy petition against Capitol in the United
States  Bankruptcy  Court  for  the  Southern  District  of  Florida.   On  that  same  day,  investors  also
filed  a  petition  to  place  Shapiro  into  personal  bankruptcy.    On  December  10,  2009,  the
Bankruptcy Court appointed a Chapter 7 interim Trustee and administratively consolidated both
the personal and corporate bankruptcy cases.
III. JURISDICTION AND VENUE
10. The Court has jurisdiction over this action pursuant to Sections 20(d) and 22(a) of
the Securities Act [15 U.S.C. §§ 77t(d) and 77v(a)] and Sections 21(d) and 27 of the Exchange
Act [15 U.S.C. §§ 78u(d) and 78aa].
11.  The  Court  has  personal  jurisdiction  over  Shapiro,  and  venue  is  proper  in  the
Southern District of Florida because many of his acts and transactions constituting violations of
the Securities and Exchange Acts occurred in the Southern District of Florida.  More specifically,
Capitol’s  principal  place  of  business  is  in  the  Southern  District  of  Florida,  Shapiro  solicited
investors from the Southern District of Florida, and Shapiro resides in this District.
12. In connection with the conduct alleged in this Complaint, the Defendant, directly
and  indirectly,  singly  or  in  concert  with  others,  made  use  of  the  means  or  instrumentalities  of
interstate commerce, the means or instruments of transportation and communication in interstate
commerce, and the mails.
3

IV. THE DEFENDANT’S FRAUDULENT INVESTMENT SCHEME
A. Overview Of The Scheme
13.  From  no  later  than  February  2003  through  at  least  November  2009,  Shapiro  and
Capitol  raised  money  from  investors  to  privately  finance  Capitol’s  business.    Shapiro  marketed
Capitol’s  business  primarily  through  relationships  he  had  developed  in  the  grocery  industry.
Shapiro managed all aspects of Capitol’s business and had direct contact with investors whom he
used to fund his business.
14. Shapiro told prospective investors Capitol would use their funds as short-term or
bridge  loans  with  a  five  to  thirty-day  duration  to  purchase  grocery  products  and  resell  the
products in other regions at a higher price.
15.  Shapiro  pitched  the  investment  opportunity  to  individuals  as  a  risk-free  way  to
earn high returns in a short period of time.  Shapiro told prospective investors Capitol would pay
the  interest  from  the  profits  it  received  when  it  resold  goods.    Shapiro  assured  prospective
investors there was virtually no risk to their principal because Capitol did not purchase products
before   it   had   sales   orders,   thus   guaranteeing   Capitol   would   be   paid   for   brokering   the
merchandise.
16.  Through  Capitol,  Shapiro  offered  investors  purportedly  no-risk  promissory  notes
with annual returns of 10 to 26 percent (higher in some cases), paid in monthly installments.  The
promissory notes indicated the terms of the investment such as the principal amount, the rate of
return, and the duration of the note, which spanned anywhere from a few days to a year.  Shapiro
told  investors  Capitol  would  refund  the  principal  within  30  days.    Some  investors  used  funds
from  their  Individual  Retirement  Accounts  to  invest  with  Capitol.    Many  investors  elected  to
reinvest their principal while receiving monthly returns.
4

17.  Shapiro  touted  Capitol’s  successful  track  record,  but  did  not  provide  any  details
about its financial condition.  Instead, he assured prospective investors their principal would be
secure  because  Capitol’s  purchase  receivables  backed  it.    For  example,  in  Capitol’s  offering
materials,  Shapiro  hyped  the  Company’s  successful  track  record,  citing  continued  growth  and
gross sales of $64 million in 2008, and projecting gross sales of $70 million in 2009.
18. In some cases, Shapiro executed personal guarantees of investors’ funds.  Shapiro
reassured investors by boasting of his own wealth and making it appear he had “deep pockets.”
Shapiro enjoyed a high profile in South Florida, bolstered by his lavish spending, his association
with   professional   athletes   through   a   sports   representation   company   he   established,   and
extravagant donations to charities – all ultimately funded with investors’ money.
19.  To  raise  funds,  Shapiro  also  attracted  investors  through  word-of-mouth  from
friends  and  business  associates.   Shapiro  paid  handsome  sales  commissions  to  individuals  who
attracted new investors.
20.  Capitol  collected  investors’  funds  via  check  or  wire  transfer  and  deposited  the
money  into  Capitol’s  bank  accounts.   These  were  the  same  accounts  Shapiro  used  for  general
operations, to pay interest and commissions, and to channel funds to his other businesses.
21. From no later than February 2003 through November 2009, Shapiro, directly and
through Capitol, raised approximately $900 million (including reinvestments) from more than 60
investors.  Most of these investors lived in Florida or Indiana.
B. Material Misrepresentations and Omissions To Investors
And Misappropriation of Investor Funds
22.   In   connection   with   Capitol’s   offering,   Shapiro   made   numerous   material
misrepresentations  and  omissions  regarding,  among  other  things,  the  safety  and  security  of
5

investors’  principal  and  returns,  the  success  of  Capitol’s  business,  the  source  of  purported
investment returns, and the use of investor funds.
23.  For  example,  Shapiro’s  claims  of  Capitol’s  success  in  the  grocery  diverting
business,  the  no-risk  nature  of  the  investment,  and  the  source  of  investor  returns  were
demonstrably false.
24. Starting no later than 2004, Capitol operated at a loss.   By January 2005, Capitol
had ceased to conduct any significant business.  Capitol’s sales were less than $300,000 in 2005
and 2006, and it had no sales from 2007 through 2009.
25.  However,  Shapiro  hid  those  losses  from  investors,  paying  principal  to  existing
investors of approximately $769 million from approximately $880 million in new investor funds
raised from January 2005 through November 2009.
26.  Shapiro  also  fabricated  invoices  and  purchase  orders  for  nonexistent  sales  and
showed them to investors who raised questions about Capitol’s business.
27.  Shapiro  knew  or  was  reckless  in  not  knowing  about  Capitol’s  deteriorating
financial condition.  He exerted total control over Capitol’s bank accounts and directed all of its
activities.    Shapiro  failed  to  disclose  Capitol’s  dire  financial  situation  to  investors,  and  instead
continued to actively solicit new investor funds.
28.  By  2009,  Capitol  had  depleted  the  funds  it  needed  to  satisfy  the  outstanding
promissory  notes  it  had  issued  to  investors.  Shapiro  ceased  making  payments  to  investors  and
refused to return their principal.  However, Shapiro continued to solicit and receive new investor
funds.  For example, as late as July 2009, Shapiro asked an investor for funds he said he would
return in five days.  The investor agreed to loan Shapiro $170,000 and Shapiro gave him a note.
However, Shapiro never repaid the investor.  Shapiro also reassured investors who contacted him
6

for  updates,  blaming  the  delay  on  the  default  of  a  purchaser  and  the  failure  of  a  large
supermarket chain.  He claimed Capitol would make payments despite the fact that Capitol had
ceased business operations.
29.  Additionally,  Shapiro  claimed  he  used  investors’  contributions  to  fund  Capitol’s
purchase of grocery products.
30.  Shapiro  also  siphoned  at  least  $38  million  of  investor  funds  to  fund  his  lavish
lifestyle and finance outside business ventures unrelated to the grocery business.  These included
his  sports  management  business  and  several  real  estate  ventures  as  well  as  to  fund  his  lavish
lifestyle.    Of  this  amount,  Capitol’s  records  reflect  that  Shapiro  paid  himself  $23  million  in
salaries and commissions, and another $15 million in loans.
31. Shapiro’s lifestyle included a $5 million home in Miami Beach, luxury cars, a $1
million boat, expensive clothes, high-stakes gambling, season tickets to premium sporting events
and other entertainment.  Shapiro charged more than $640,000 of personal expenses to Capitol’s
corporate  American  Express  Black  Card,  including  $116,000  of  charges  a  girlfriend  incurred.
Shapiro’s  extravagant  spending  also  extended  to  charitable  donations.    For  example,  Shapiro
donated funds to a local university’s athletic program.
32.  Shapiro  also  used  investor  funds  to  make  large  payments  to  sales  agents  in  the
form  of  undisclosed  fees  and  commissions.    During  the  course  of  the  scheme  Shapiro  paid  at
least $13 million to individuals in the form of undisclosed commissions and fees.
V. CLAIMS FOR RELIEF

COUNT I

Shapiro Violated Section 17(a)(1) of the Securities Act

33. The Commission repeats and realleges paragraphs 1 through 32 of its Complaint.
7

34.  From  at  least  February  2003  through  November  2009,  Shapiro,  directly  or
indirectly,  by  use  of  the  means  or  instruments  of  transportation  or  communication  in  interstate
commerce  and  by  use  of  the  mails,  in  the  offer  or  sale  of  securities,  as  described  in  this
Complaint, knowingly, willfully or recklessly employed devices, schemes or artifices to defraud.
35.  By  reason  of  the  foregoing,  Shapiro  directly  or  indirectly  violated,  and,  unless
enjoined,  is  reasonably  likely  to  continue  to  violate,  Section  17(a)(l)  of  the  Securities  Act  [15
U.S.C. §77q(a)].
COUNT II

Shapiro Violated Section 17(a)(2) and (3) of the Securities Act

36. The Commission repeats and realleges paragraphs 1 through 32 of its Complaint.
37.  From  at  least  February  2003  through  November  2009,  Shapiro,  directly  or
indirectly, in the offer or sale of securities, by the use of means or instruments of transportation
or  communication  in  interstate  commerce,  or  of  the  mails:  (a)  obtained  money  or  property  by
means  of  untrue  statements  of  material  fact  or  by  omitting  to  state  material  facts  necessary  in
order  to  make  the  statements  made,  in  the  light  of  the  circumstances  under  which  they  were
made,  not  misleading;  or  (b)  engaged  in  transactions,  practices  or  courses  of  business  which
operated or would operate as a fraud or deceit upon the purchasers of such securities.
38.  By  reason  of  the  foregoing,  Shapiro  directly  or  indirectly  violated,  and,  unless
enjoined,  is  reasonably  likely  to  continue  to  violate,  Sections  17(a)(2)  and  (3)  of  the  Securities
Act [15 U.S.C. §§ 77q(a)(2) and (3)].
COUNT III

Shapiro Violated Section 10(b) and Rule 10b-5 of the Exchange Act

39. The Commission repeats and realleges paragraphs 1 through 32 of its Complaint.
8

40.  From  at  least  February  2003  through  November  2009,  Shapiro,  directly  or
indirectly,  by  use  of  the  means  and  instrumentality  of  interstate  commerce,  and  of  the  mails  in
connection  with  the  purchase  or  sale  of  securities,  knowingly,  willfully  or  recklessly:  (a)
employed devices, schemes or artifices to defraud; (b) made untrue statements of material facts
and omitting to state material facts necessary in order to make the statements made, in the light
of  the  circumstances  under  which  they  were  made,  not  misleading;  or  (c)  engaged  in  acts,
practices and courses of business which have operated, are now operating and will operate as a
fraud upon the purchasers of such securities.
41.  By  reason  of  the  foregoing,  Shapiro  directly  or  indirectly  violated,  and,  unless
enjoined,  is  reasonably  likely  to  continue  to  violate  Section  10(b)  of  the  Exchange  Act  [15
U.S.C. § 78j(b)] and Exchange Act Rule l0b-5 [17 C.F.R. § 240].
VI. RELIEF REQUESTED

WHEREFORE, the Commission respectfully requests that the Court:

I.

Declaratory Relief

Declare,  determine,  and  find  Shapiro  committed  the  violations  of  the  federal  securities
laws alleged in this Complaint.
II.

Permanent Injunctive Relief

Issue  a  Permanent  Injunction  restraining  and  enjoining  Shapiro  from  violating  Section
17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act.
9

III.

A Sworn Accounting

Issue  an  Order  requiring  Shapiro  to  file  with  this  Court  a  sworn  written  accounting
identifying:
(1)  All  assets,  liabilities  and  property  currently  held,  directly  or  indirectly,  by  or  for
the  benefit  of  Shapiro,  including,  without  limitation,  bank  accounts,  brokerage  accounts,
investments,  business  interests,  loans,  lines  of  credit,  and  real  and  personal  property  wherever
situated, describing each asset and liability, its current location and amount;
(2)  All  money,  funds,  securities,  property  (real  and  personal),  assets  and  income
received  by  Shapiro,  or  for  his  direct  or  indirect  benefit,  at  any  time  from  February  1,  2003
through  the  date  of  such  accounting,  describing  the  source,  amount,  disposition  and  current
location of each of the items listed; and
(3) The names and last known addresses of all bailees, debtors, and other persons and
entities that currently are holding the assets, funds or property of Shapiro.
IV.

Disgorgement

Issue an Order directing Shapiro to disgorge all ill-gotten gains, including prejudgment
interest, resulting from the acts or courses of conduct alleged in this Complaint.
V.

Civil Money Penalty

Issue an Order directing Shapiro to pay civil money penalties pursuant to Section 20(d)
of the Securities Act [15 U.S.C. § 77t(d)]; and Section 21(d) of the Exchange Act [15 U.S.C. §
78(d)(3)].
10

VI.
Further Relief
Grant such other and further relief as may be necessary and appropriate.
VII.
Retention of Jurisdiction
Further,  the  Commission  respectfully  requests  the  Court  retain  jurisdiction  over  this
action in order to implement and carry out the terms of all orders and decrees that may hereby be
entered,  or  to  entertain  any  suitable  application  or  motion  by  the  Commission  for  additional
relief within the jurisdiction of this Court.
                                                                        Respectfully            submitted,
April            21,            2010                                                By:	            s/Amie            Riggle            Berlin
                                                                        Amie            Riggle            Berlin,            Esq.
                                                                        Senior            Trial            Counsel
                                                                        Florida            Bar            No.            630020
                                                                        Direct            Dial:            (305)            982-6322
                                                                        E-mail:            [email protected]
      Linda S. Schmidt
                                                            Senior            Counsel
                                                                        Florida            Bar            No.            0156337
                                                                        Direct            Dial:            (305)            982-6315
      E-mail : [email protected]
      Attorneys for Plaintiff
U.S. Securities and Exchange Commission
                                                                        801            Brickell            Avenue,            Suite            1800
                                                                        Miami,            Florida            33131
Telephone:            (305)            982-6300
                                                                        Facsimile:            (305)            536-4154
11

Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 1 of 11 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF FLORIDA 


MIAMI DIVISION 


CASE NO.
 

SECURITIES AND EXCHANGE COMMISSION, ) 
)

   Plaintiff,  )  
v.  ) 


 ) 
  
NEVIN K. SHAPIRO, ) 


) 

   Defendant.  ) 
  
_______________________________________________ ) 


COMPLAINT 

Plaintiff Securities and Exchange Commission alleges as follows: 

I. INTRODUCTION 

1. The Commission brings this action to enjoin Defendant Nevin K. Shapiro from 

violating the anti-fraud provisions of the federal securities laws. 

2. From no later than February 2003 until at least November 2009, Shapiro, directly 

and through his company Capitol Investments USA, Inc., operated an offering fraud that, by 

January 2005, devolved into a massive Ponzi scheme.  All told, Shapiro raised approximately 

$900 million from investors through these fraudulent schemes. 

3. Shapiro solicited investments for Capitol primarily during personal discussions, 

where he promised to refund prospective investors’ principal within thirty days and pay 10% to 

26% annual returns on their investment. Shapiro told prospective investors this was a risk-free 

investment in Capitol’s grocery business and touted Capitol’s financial success as well as his 

own. Shapiro assured prospective investors Capitol’s purchase contracts and accounts receivable 

secured their investments.   



    

 

 

Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 2 of 11 

4. In reality, Shapiro misappropriated at least $38 million of investor contributions 

to finance his lavish lifestyle and fund unrelated personal business ventures. 

5. By late 2004, Capitol was operating at a loss. From 2005 though late 2009, 

Capitol had almost no business operations.  To hide this from investors, Shapiro merely repaid 

earlier investors with approximately $769 million collected from new investors in typical Ponzi 

scheme fashion.   

6. Through the conduct set forth above and described in more detail below, Shapiro 

violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)], 

Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 

U.S.C. § 78j(b) and 17 C.F.R. §240.10b-5].   

7. The Commission asks the Court to enter: (1) a permanent injunction restraining 

and enjoining Shapiro from violating the federal securities laws; (2) an order directing Shapiro to 

submit a sworn accounting and disgorge all ill-gotten gains, with prejudgment interest; and (3) 

an order directing Shapiro to pay civil penalties. 

II. DEFENDANT AND RELATED PARTY 

A. Defendant 

8. Shapiro, 41, resides in Miami Beach, Florida.  He was Capitol’s founder, sole 

shareholder, president, and CEO.  Shapiro controlled all aspects of Capitol’s business and 

fundraising efforts. He met with investors on Capitol’s behalf and signed promissory notes, 

personal guarantees and joint venture agreements, and approved payments to investors.   

B. Related Entity 

9. Capitol is a Florida corporation formed in 1998 with its principal place of 

business in Miami Beach.  Capitol was a grocery diverter and food broker. Grocery diverters 

2
 



    

 

 

 

Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 3 of 11 

purchase lower-priced groceries from vendors in one region of the country and resell them for a 

profit to buyers in another region where prices are higher.  Capitol has never registered an 

offering or class of securities under the Securities Act or the Exchange Act. On November 30, 

2009, a group of investors filed an involuntary bankruptcy petition against Capitol in the United 

States Bankruptcy Court for the Southern District of Florida. On that same day, investors also 

filed a petition to place Shapiro into personal bankruptcy. On December 10, 2009, the 

Bankruptcy Court appointed a Chapter 7 interim Trustee and administratively consolidated both 

the personal and corporate bankruptcy cases. 

III. JURISDICTION AND VENUE 

10. The Court has jurisdiction over this action pursuant to Sections 20(d) and 22(a) of 

the Securities Act [15 U.S.C. §§ 77t(d) and 77v(a)] and Sections 21(d) and 27 of the Exchange 

Act [15 U.S.C. §§ 78u(d) and 78aa]. 

11. The Court has personal jurisdiction over Shapiro, and venue is proper in the 

Southern District of Florida because many of his acts and transactions constituting violations of 

the Securities and Exchange Acts occurred in the Southern District of Florida. More specifically, 

Capitol’s principal place of business is in the Southern District of Florida, Shapiro solicited 

investors from the Southern District of Florida, and Shapiro resides in this District. 

12. In connection with the conduct alleged in this Complaint, the Defendant, directly 

and indirectly, singly or in concert with others, made use of the means or instrumentalities of 

interstate commerce, the means or instruments of transportation and communication in interstate 

commerce, and the mails. 

3
 



    

 

 

 

 

 

 

Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 4 of 11 

IV. THE DEFENDANT’S FRAUDULENT INVESTMENT SCHEME 

A. Overview Of The Scheme 

13. From no later than February 2003 through at least November 2009, Shapiro and 

Capitol raised money from investors to privately finance Capitol’s business.  Shapiro marketed 

Capitol’s business primarily through relationships he had developed in the grocery industry. 

Shapiro managed all aspects of Capitol’s business and had direct contact with investors whom he 

used to fund his business. 

14. Shapiro told prospective investors Capitol would use their funds as short-term or 

bridge loans with a five to thirty-day duration to purchase grocery products and resell the 

products in other regions at a higher price. 

15. Shapiro pitched the investment opportunity to individuals as a risk-free way to 

earn high returns in a short period of time.  Shapiro told prospective investors Capitol would pay 

the interest from the profits it received when it resold goods.  Shapiro assured prospective 

investors there was virtually no risk to their principal because Capitol did not purchase products 

before it had sales orders, thus guaranteeing Capitol would be paid for brokering the 

merchandise. 

16. Through Capitol, Shapiro offered investors purportedly no-risk promissory notes 

with annual returns of 10 to 26 percent (higher in some cases), paid in monthly installments.  The 

promissory notes indicated the terms of the investment such as the principal amount, the rate of 

return, and the duration of the note, which spanned anywhere from a few days to a year.  Shapiro 

told investors Capitol would refund the principal within 30 days.  Some investors used funds 

from their Individual Retirement Accounts to invest with Capitol.  Many investors elected to 

reinvest their principal while receiving monthly returns.  

4
 



    

 

 

 

Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 5 of 11 

17. Shapiro touted Capitol’s successful track record, but did not provide any details 

about its financial condition. Instead, he assured prospective investors their principal would be 

secure because Capitol’s purchase receivables backed it.  For example, in Capitol’s offering 

materials, Shapiro hyped the Company’s successful track record, citing continued growth and 

gross sales of $64 million in 2008, and projecting gross sales of $70 million in 2009.   

18. In some cases, Shapiro executed personal guarantees of investors’ funds.  Shapiro 

reassured investors by boasting of his own wealth and making it appear he had “deep pockets.” 

Shapiro enjoyed a high profile in South Florida, bolstered by his lavish spending, his association 

with professional athletes through a sports representation company he established, and 

extravagant donations to charities – all ultimately funded with investors’ money.   

19. To raise funds, Shapiro also attracted investors through word-of-mouth from 

friends and business associates. Shapiro paid handsome sales commissions to individuals who 

attracted new investors. 

20. Capitol collected investors’ funds via check or wire transfer and deposited the 

money into Capitol’s bank accounts. These were the same accounts Shapiro used for general 

operations, to pay interest and commissions, and to channel funds to his other businesses. 

21. From no later than February 2003 through November 2009, Shapiro, directly and 

through Capitol, raised approximately $900 million (including reinvestments) from more than 60 

investors. Most of these investors lived in Florida or Indiana. 

B. Material Misrepresentations and Omissions To Investors 
And Misappropriation of Investor Funds 

22. In connection with Capitol’s offering, Shapiro made numerous material 

misrepresentations and omissions regarding, among other things, the safety and security of 

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Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 6 of 11 

investors’ principal and returns, the success of Capitol’s business, the source of purported 

investment returns, and the use of investor funds. 

23. For example, Shapiro’s claims of Capitol’s success in the grocery diverting 

business, the no-risk nature of the investment, and the source of investor returns were 

demonstrably false.   

24. Starting no later than 2004, Capitol operated at a loss. By January 2005, Capitol 

had ceased to conduct any significant business.  Capitol’s sales were less than $300,000 in 2005 

and 2006, and it had no sales from 2007 through 2009.   

25. However, Shapiro hid those losses from investors, paying principal to existing 

investors of approximately $769 million from approximately $880 million in new investor funds 

raised from January 2005 through November 2009. 

26. Shapiro also fabricated invoices and purchase orders for nonexistent sales and 

showed them to investors who raised questions about Capitol’s business. 

27. Shapiro knew or was reckless in not knowing about Capitol’s deteriorating 

financial condition.  He exerted total control over Capitol’s bank accounts and directed all of its 

activities.  Shapiro failed to disclose Capitol’s dire financial situation to investors, and instead 

continued to actively solicit new investor funds. 

28. By 2009, Capitol had depleted the funds it needed to satisfy the outstanding 

promissory notes it had issued to investors. Shapiro ceased making payments to investors and 

refused to return their principal.  However, Shapiro continued to solicit and receive new investor 

funds. For example, as late as July 2009, Shapiro asked an investor for funds he said he would 

return in five days. The investor agreed to loan Shapiro $170,000 and Shapiro gave him a note. 

However, Shapiro never repaid the investor. Shapiro also reassured investors who contacted him 

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Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 7 of 11 

for updates, blaming the delay on the default of a purchaser and the failure of a large 

supermarket chain.  He claimed Capitol would make payments despite the fact that Capitol had 

ceased business operations.   

29. Additionally, Shapiro claimed he used investors’ contributions to fund Capitol’s 

purchase of grocery products. 

30. Shapiro also siphoned at least $38 million of investor funds to fund his lavish 

lifestyle and finance outside business ventures unrelated to the grocery business.  These included 

his sports management business and several real estate ventures as well as to fund his lavish 

lifestyle.  Of this amount, Capitol’s records reflect that Shapiro paid himself $23 million in 

salaries and commissions, and another $15 million in loans.   

31. Shapiro’s lifestyle included a $5 million home in Miami Beach, luxury cars, a $1 

million boat, expensive clothes, high-stakes gambling, season tickets to premium sporting events 

and other entertainment.  Shapiro charged more than $640,000 of personal expenses to Capitol’s 

corporate American Express Black Card, including $116,000 of charges a girlfriend incurred. 

Shapiro’s extravagant spending also extended to charitable donations.  For example, Shapiro 

donated funds to a local university’s athletic program.   

32. Shapiro also used investor funds to make large payments to sales agents in the 

form of undisclosed fees and commissions.  During the course of the scheme Shapiro paid at 

least $13 million to individuals in the form of undisclosed commissions and fees. 

V. CLAIMS FOR RELIEF
 

COUNT I
 

Shapiro Violated Section 17(a)(1) of the Securities Act
 

33. The Commission repeats and realleges paragraphs 1 through 32 of its Complaint. 

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Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 8 of 11 

34. From at least February 2003 through November 2009, Shapiro, directly or 

indirectly, by use of the means or instruments of transportation or communication in interstate 

commerce and by use of the mails, in the offer or sale of securities, as described in this 

Complaint, knowingly, willfully or recklessly employed devices, schemes or artifices to defraud. 

35. By reason of the foregoing, Shapiro directly or indirectly violated, and, unless 

enjoined, is reasonably likely to continue to violate, Section 17(a)(l) of the Securities Act [15 

U.S.C. §77q(a)]. 

COUNT II
 

Shapiro Violated Section 17(a)(2) and (3) of the Securities Act
 

36. The Commission repeats and realleges paragraphs 1 through 32 of its Complaint. 

37. From at least February 2003 through November 2009, Shapiro, directly or 

indirectly, in the offer or sale of securities, by the use of means or instruments of transportation 

or communication in interstate commerce, or of the mails: (a) obtained money or property by 

means of untrue statements of material fact or by omitting to state material facts necessary in 

order to make the statements made, in the light of the circumstances under which they were 

made, not misleading; or (b) engaged in transactions, practices or courses of business which 

operated or would operate as a fraud or deceit upon the purchasers of such securities. 

38. By reason of the foregoing, Shapiro directly or indirectly violated, and, unless 

enjoined, is reasonably likely to continue to violate, Sections 17(a)(2) and (3) of the Securities 

Act [15 U.S.C. §§ 77q(a)(2) and (3)]. 

COUNT III
 

Shapiro Violated Section 10(b) and Rule 10b-5 of the Exchange Act
 

39. The Commission repeats and realleges paragraphs 1 through 32 of its Complaint. 

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Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 9 of 11 

40. From at least February 2003 through November 2009, Shapiro, directly or 

indirectly, by use of the means and instrumentality of interstate commerce, and of the mails in 

connection with the purchase or sale of securities, knowingly, willfully or recklessly: (a) 

employed devices, schemes or artifices to defraud; (b) made untrue statements of material facts 

and omitting to state material facts necessary in order to make the statements made, in the light 

of the circumstances under which they were made, not misleading; or (c) engaged in acts, 

practices and courses of business which have operated, are now operating and will operate as a 

fraud upon the purchasers of such securities. 

41. By reason of the foregoing, Shapiro directly or indirectly violated, and, unless 

enjoined, is reasonably likely to continue to violate Section 10(b) of the Exchange Act [15 

U.S.C. § 78j(b)] and Exchange Act Rule l0b-5 [17 C.F.R. § 240]. 

VI. RELIEF REQUESTED
 

WHEREFORE, the Commission respectfully requests that the Court: 


I.
 

Declaratory Relief
 

Declare, determine, and find Shapiro committed the violations of the federal securities 

laws alleged in this Complaint. 

II.
 

Permanent Injunctive Relief
 

Issue a Permanent Injunction restraining and enjoining Shapiro from violating Section 

17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act. 

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Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 10 of 11 

III.
 

A Sworn Accounting
 

Issue an Order requiring Shapiro to file with this Court a sworn written accounting 

identifying: 

(1) All assets, liabilities and property currently held, directly or indirectly, by or for 

the benefit of Shapiro, including, without limitation, bank accounts, brokerage accounts, 

investments, business interests, loans, lines of credit, and real and personal property wherever 

situated, describing each asset and liability, its current location and amount; 

(2) All money, funds, securities, property (real and personal), assets and income 

received by Shapiro, or for his direct or indirect benefit, at any time from February 1, 2003 

through the date of such accounting, describing the source, amount, disposition and current 

location of each of the items listed; and  

(3) The names and last known addresses of all bailees, debtors, and other persons and 

entities that currently are holding the assets, funds or property of Shapiro. 

IV.
 

Disgorgement
 

Issue an Order directing Shapiro to disgorge all ill-gotten gains, including prejudgment 

interest, resulting from the acts or courses of conduct alleged in this Complaint. 

V.
 

Civil Money Penalty
 

Issue an Order directing Shapiro to pay civil money penalties pursuant to Section 20(d) 

of the Securities Act [15 U.S.C. § 77t(d)]; and Section 21(d) of the Exchange Act [15 U.S.C. § 

78(d)(3)]. 

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Case 1:10-cv-21281-XXXX Document 1 Entered on FLSD Docket 04/21/2010 Page 11 of 11 

VI. 

Further Relief 

Grant such other and further relief as may be necessary and appropriate.  

VII. 

Retention of Jurisdiction 

Further, the Commission respectfully requests the Court retain jurisdiction over this 

action in order to implement and carry out the terms of all orders and decrees that may hereby be 

entered, or to entertain any suitable application or motion by the Commission for additional 

relief within the jurisdiction of this Court. 

      Respectfully submitted, 

April 21, 2010    By:	 s/Amie Riggle Berlin
      Amie Riggle Berlin, Esq. 
      Senior Trial Counsel 
      Florida Bar No. 630020 
      Direct Dial: (305) 982-6322 
      E-mail: [email protected]

      Linda  S.  Schmidt
     Senior Counsel 

      Florida Bar No. 0156337 
      Direct Dial: (305) 982-6315 
      E-mail  :  [email protected]

      Attorneys  for  Plaintiff  
U.S. Securities and Exchange Commission 

      801 Brickell Avenue, Suite 1800 
      Miami, Florida 33131 

Telephone: (305) 982-6300 
      Facsimile: (305) 536-4154 

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