Press Releases
FINANCIAL ADVISOR CHARGED WITH STEALING MORE THAN $3,000,000 IN “PONZI” SCHEME
February 3, 2009
FOR IMMEDIATE RELEASE
JUDITH ZABALAOUI, age 71, a resident of Metairie, Louisiana, was charged in a five-count bill of information, with mail fraud, announced U.S. Attorney Jim Letten today. According to documents filed in federal court, ZABALAOUI was a Certified Financial Planner, who consulted with clients in the New Orleans area regarding investment and financial planning strategies. From 1993 until late 2007, ZABALAOUI created a scheme to defraud numerous clients. ZABALAOUI promised these clients returns between 13% and 26% if they invested in two companies, Paragon Company and Omni Clearing. Unbeknownst to the clients, these companies were both fraudulent. ZABALAOUI opened P.O. boxes at UPS stores in Colorado and Delaware, as they would serve to operate as the purported corporate offices of the companies. Phone lines were also set up to receive messages whenever the clients had questions about their “investments.” ZABALAOUI also created fraudulent company letterheads and employees. ZABALAOUI also opened bank accounts in Metairie, Louisiana, in the names of Paragon Company and Baines Bailey Space & Direct.
According to allegations in the Bill of Information, ZABALAOUI got access to client funds in two ways: She would either deposit the checks or wire transfers that she received for Paragon Company, and deposit them into her Paragon Company bank account, or she would take advantage of the signed power of attorney she received from her clients for Omni Clearing, and either deposit the checks or wire transfers for Omni Clearing, into her Baines Bailey account. On several occasions, clients called to request liquidation of part of their “investments.” ZABALAOUI would then create what appeared to be correspondence between herself and the fraudulent employees and mail this correspondence to the clients. This was as a way to legitimize the companies, explain that she was trying to obtain funds, and also to offer evidence that it would take time to liquidate the funds due to certain restrictions. It also gave ZABALAOUI time to convince other clients to invest money in Paragon Company or Omni Clearing.
ZABALAOUI was allegedly able to further the scheme to defraud by creating and mailing false account statements that appeared to be from Paragon Company and Omni Clearing, to the requesting client’s address. These account statements would detail items such as the account balances, as well as interest earned. The clients believed that the investments were profitable, when in fact the money had never been invested at all. The allegedly stolen funds were used by ZABALAOUI to pay for personal expenses such as utilities for her family and others, clothing, credit card balances, mortgages, medical care for her family, her husband’s family, her assistant’s family and others, rent and living expenses for apartments for friends and family, food for her family and others, as well as vacations. From 1993 through 2007, ZABALAOUI is charged with having embezzled more than $3,000,000 of client funds.
ZABALAOUI faces a maximum sentence of up to twenty (20) years in prison, a $250,000 fine, and three (3) years of supervised release.
U. S. Attorney Letten reiterated that the bill of information is merely a charge and that the guilt of the defendant must be proven beyond a reasonable doubt.
The case was investigated by agents of the United States Postal Inspection Service.
The case is being prosecuted by Assistant U. S. Attorney Jon Maestri and First Assistant United States Attorney Jan Maselli Mann.
(Download Bill of Information 
)
