While two cases of fraud have made a $13 million dent on long-term reserves, Ball State officials say the university is focused on recovering the assets, holding people accountable and implementing procedures to avoid the situation in the future.
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The $13 million loss After the U.S. Attorneys’ Office contacted Ball State in September 2011, the university found two cases involving investments by Gale Prizevoits, former director of cash and investments. Prior to the investigation, Ball State had no idea the contracts existed. 2008 $8.165 million Prizevoits, representing the university, entered into three putative contracts with Seth Beoku Betts of Betts and Gambles. The contracts, dated July 3, July 24 and Dec. 9, totaled $8.165 million for buying collateralized mortgage obligations and selling them to make a profit. Betts received a sentence June 5 for 51 months in prison for defrauding Ball State. April 27, 2010 $5 million Once again, Prizevoits created a putative contract — this time with Blackhawk Wealth Solutions Inc. for $5 million. The contract states the company would get federal Treasury STRIPS, with Ball State receiving 25 percent of the net profits. However, $3 million of this money found its way to George Montolio of New York. This case led to his sentencing of 36 months in prison for wire fraud. |
“Any loss of funds is an outrage,” said Randy Howard, vice president for business affairs and treasurer. “It upsets the [Board of Trustees], it upsets the administration. We wish it had never happened, but we were victims of a crime.”
This money came from long-term reserves, comprised of a mixture of reserves, such as housing, dining and self-insurance. To prevent short-term damage, the university has contingency funds that act as a line of defense.
However, the university will still need to replenish the reserves over time.
“And that’s the good news — we have a lot of time to recoup them,” Howard said.
As one of the university’s priorities, Howard said, Ball State has implemented new checks and balances to avoid this situation in the future.
This includes a list of pre-approved brokers that is annually reviewed. This list goes through independent sources to find any charges or allegations of SEC fines, Howard said.
“You can never put enough internal controls in place to stop a criminal,” Howard said. “So if someone’s going to commit criminal activity, it’s really hard to stop it.”
When the U.S. Attorneys’ Office contacted Ball State in September 2011, telling the university that it might be a victim of fraud, Ball State found two potential cases after asking Gale Prizevoits, former director of cash and investments, to provide documents.
“She signed contracts that the university didn’t even know existed,” Howard said. “... A prudent and reasonable investor would not have signed them, particularly if they knew our investment policy.”
Tom Taylor, vice president for Enrollment, Marketing, and Communications, said those contracts “were no where in our files.”
After the investigation, Ball State turned over the findings to the U.S. Attorneys’ Office. The office had asked the university to not publicly disclose the information because of the investigation at the time. Now that Ball State can talk, Howard said they will make sure to keep the community updated on the situation.
“We’re happy we can talk about it,” Howard said.
Prizevoits was terminated Oct. 24, 2011, from her job after the university found she had made the putative investments. Her investments violated the university’s policy, including investing university funds in speculative trades. Her compensation as of Sept. 1, 2011, was $84,437.
Prizevoits had attempted to conceal the transactions from the university by altering records after issuing them, Howard said. An example is changing a record to remove a semi-annual interest payment so that when the payment never showed up, it wouldn’t raise a red flag.
“It was a fraud, so at the end of the day, there may have been really no real investment,” Howard said. “But even if there was, the types of investments these contracts bill out are highly speculative, promising returns that no reasonable investor would have believed.”
Howard said the case that U.S. Attorneys’ Office noticed involved a $5 million investment that Prizevoits made to Blackhawk Wealth Solutions Inc.
Blackhawk was represented by company President Peter R. Sollenne in the contract, dated April 27, 2010.
This putative contract states that Blackhawk would contact Sterling Capital LP for unrestricted U.S. government Treasury STRIPS. The university and Blackhawk would enter into a joint venture for buying T-STRIPS, with Ball State receiving 25 percent of the net profits.
However, some of that money — $3 million — found its way to George Montolio of Sheridan Capitals LLC. This company was to purchase T-STRIPS for two investment companies, both unnamed in the federal complaint, after receiving $3.8 million. Sheridan Capitals LLC never provided the T-STRIPS.
Montolio, 46, was in possession of a bank account that included the university’s $3 million, states the complaint the Daily News received from the university. The balance on that account was zero, according to records the criminal investigator, Scott F. Romonowski, obtained.
On Sept. 23, 2011, Montolio was arrested on a charge of wire fraud. A Southern District of New York judge sentenced him March 7, 2013, to 36 months in prison.
In order to repay the university, Montolio consented to the forfeiture of four separate Morris Avenue properties in Bronx, N.Y., a 2010 Chevrolet Camaro, an authentic baseball jersey signed by Mickey Mantle and an authentic pair of boxing gloves signed by Mike Tyson.
These items were purchased as a result of his wire fraud, according to the record.
The university also found Prizevoits’ $8.165 million contract regarding Seth Beoku Betts, 38. He received 51 months in prison for defrauding Ball State.
Betts was ordered to repay the university. On Dec. 11, 2013, his 4,662-square-foot house sold for $1,050,000, according to a listing by Karen Kennedy of Lang Realty.
“We’re still hopeful they’re going to find more bad people to bring to justice,” Taylor said. “We’re still hopeful that they may discover other assets that could be recovered.”
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