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Pittance comes in on order

Rochester Business Journal
September 7, 2012

Hit with a court order in 2007 to repay $25.8 million to investors in real estate projects they promoted through Pittsford Capital Income Partners LLC, Mark Palazzo and Edward Tackaberry have paid back $324.75 so far.
 
Court records show that payments from the pair began this year with four $65 payments collected from Tackaberry and a single $64.75 payment collected from Palazzo. How much more could be forthcoming is not clear.
 
The payments from the former Pittsford Capital principals came under a December 2010 court order through garnishment of their salaries. Both are working in the real estate industry locally.
 
Securities and Exchange Commission attorney David Stoelting, who handled the 2006 SEC civil suit that resulted in the $25.8 million judgment, confirmed the amount Tackaberry and Palazzo have paid but was at a loss to say why they had not paid more.
 
"I've been unemployed for the last three years," said Tackaberry, who first disputed the court records of payments he had made as "totally inaccurate" but on closer questioning confirmed the amount.
 
Currently working as a real estate agent, Tackaberry said he had not closed any deals.
 
Palazzo, identified as the manager and a broker of Rich Realty on the Brighton firm's website, did not respond to an email or a phone message.
 
Court records show payments from Tackaberry and Palazzo beginning in February with Tackaberry's first $65 payment and continuing with a second $65 payment from Tackaberry in March and two more in April. Palazzo's single $64.75 payment came in June.
 
In the 2006 lawsuit, the SEC accused Palazzo and Tackaberry of a grab bag of violations related to unregistered real estate securities the pair had peddled to some 275 investors.
 
Pittsford Capital promised investors high returns. However, the SEC claimed, in some cases the securities they sold had stopped paying interest and the partners appeared to be surreptitiously skimming off investor money for other purposes. Among irregularities detailed in the agency's court papers were Palazzo's alleged transfers of six-figure amounts to himself and money transferred into a wireless phone venture that later collapsed.
 
In an answer to the SEC complaint, Palaz-zo acknowledged that Pittsford Capital had suffered losses but maintained they had stemmed from poor business judgment, not fraud.
 
After weighing the SEC's allegations, U.S. District Judge Michael Telesca concluded it appeared that the pair had committed securities violations, would continue to do so and would probably try to destroy records. Telesca granted an SEC request for a preliminary injunction freezing Pittsford Capital's assets, putting the firm into receivership and ordering Tackaberry and Palaz-zo not to commit securities law violations.
 
In a later filing, Telesca described the Pittsford Capital principals as "trained securities professionals who repeatedly made false and misleading statements and omissions to investors," adding that "(Palazzo and Tackaberry) knew what they were doing and they did it with fraudulent intent."
 
In 2007, Telesca acted on the SEC's motion for summary judgment by permanently enjoining Tackaberry and Palazzo from violating securities laws, ordering them to disgorge $11.7 million plus more than $14 million in interest and levying civil fines of $75,000 each.
 
In 2009, the court approved a payment plan that would return 7.86 cents on the dollar to each investor. In 2010, with no payments yet forthcoming from Tackaberry or Palazzo, the SEC started contempt proceedings against the former partners. It withdrew the complaint against Palazzo but reserved the right to reopen it.
 
Telesca found Tackaberry to be in contempt, noting in an order dated May 20, 2010, that Tackaberry appeared to be continuing to solicit investors in a new promissory note scheme through a website that he took down after the SEC started contempt proceedings. Tackaberry's denial of having solicited investors was unconvincing and unsupported by any factual documentation. Evidence that he had done so appeared to be solid, Telesca said.
 
Pittsford Capital receiver Lucien Morin II of McConville, Considine, Cooman & Morin P.C. said investors who had parked funds in vehicles the pair promoted from 1996 to 2004 were owed approximately $12.5 million.
 
Morin said in August that he had nearly wrapped up his recovery of Pittsford Capital assets. He had not yet computed the total collected but characterized it as a minimal sum that would likely amount to less than 5 percent of what the pair owe.

9/7/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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