Ken Starr denies fraud charges; feds allege he stole $59 million ‘and counting’

Less than 24 hours after federal prosecutors revised their estimate of Kenneth Ira Starr's alleged theft to at least twice as large as their original figure of $30 million, the financial adviser to the stars denied any wrongdoing in a brief court appearance.

Less than 24 hours after federal prosecutors revised their estimate of Kenneth Ira Starr’s alleged theft to at least twice as large as their original figure of $30 million, the financial adviser to the stars denied any wrongdoing in a brief court appearance.
Mr. Starr, 66, was indicted yesterday following his May 27 arrest for allegedly swindling clients, many of whom were celebrities and socialites. Mr. Starr pleaded not guilty today in Manhattan federal court, where a judge jailed him last month after prosecutors argued that he might flee.
The indictment accuses Starr of stealing at least $59 million from 11 clients, including an actress, a former executive of a talent agency, the stepson of a deceased heir to a business fortune, a 99-year-old heiress and a film producer.
Originally, investigators estimated that Mr. Starr allegedly stole $30 million from seven of his clients. (See the list of famous clients Mr. Starr has advised.)
“Mr. Starr wishes to plead not guilty,” his court-appointed lawyer, Sabrina Shroff, said in court today. Mr. Starr didn’t speak and will next appear in court June 21.
Mr. Starr used his access to famous and powerful clients “to burnish an image of trustworthiness, leading his clients to entrust him with management and control of their financial affairs,” sometimes assuming “total control” over their financial lives, the indictment charges.
“In the less than two weeks since Kenneth Starr’s arrest, this investigation has maintained its velocity,” Ms. Bharara said in a statement. “The scope of the alleged fraud has doubled and is now up to $59 million and counting.”
If convicted of wire fraud, Mr. Starr faces a sentence of as long as 20 years in prison.
Abbe Lowell, a lawyer representing Mr. Starr in a civil lawsuit brought by the Securities and Exchange Commission, couldn’t immediately be reached for comment. Peggy Cross, a public defender appointed to represent Mr. Starr, didn’t immediately return a voice mail message left at her office after regular business hours yesterday.
Mr. Starr was arrested May 27 and accused of defrauding clients, including heiress Rachel “Bunny” Mellon, in a scheme to buy a $7.5 million Manhattan apartment. He has been held in jail since his arrest.
Mr. Starr’s bank accounts have been frozen, and the former manager of more than $700 million was being represented by a public defender because he couldn’t afford a lawyer.
His company “performs accounting, bookkeeping and tax return preparation services” for 30 to 40 clients, Aurora Cassirer, temporary receiver for his Starr & Co. LLC, said June 4 in a report to a judge. The company collects and deposits their income into their bank accounts, and arranges for payments of rent and mortgage bills, she wrote.

Personal clients at Starr Investment Advisors LLC and Starr & Co. fell from 140 a month or two earlier and were still dropping at the time of her report, according to Ms. Cassirer, an attorney with Troutman Sanders LLP.
Arrested with Mr. Starr last month was Andrew Stein, former president of the borough of Manhattan and the New York City Council. Mr. Stein, who is accused of a tax crime and of lying to investigators, wasn’t part of yesterday’s indictment.
The indictment broadens the charges, alleging that Mr. Starr stole at least $28 million by transferring client funds to accounts he controlled and defrauding them of $29 million by lying about their investments.
According to the indictment, Mr. Starr used at least $2.5 million in client money in 2009 and 2010 to pay Starr & Co. operating expenses and to make payments to himself and his wife. This year, he also took money from three clients to repay $4 million to an elderly client, and he stole $5.75 million from five clients to buy the five-bedroom, 6.5-bathroom Manhattan apartment, according to the indictment.
Prosecutors said Mr. Starr diverted another $1 million to an account held by an entity called Marose LLC. Marose is registered in New York state records to Marvin Rosen, a former Democratic National Committee finance chairman and Mr. Starr’s partner at Diamond Edge Capital Partners LLC, which markets investments to public pension funds. Rosen didn’t return a call seeking comment.
Separately, Mr. Starr is accused of promising to invest $29 million in client funds in “sure deals” and instead routing the money to riskier ventures. He promised an “elderly actress” that her investments were “going well” when he had actually put her funds in a money-losing restaurant chain, according to the indictment.
Prosecutors want Mr. Starr to forfeit at least $57.3 million in property owned by him and his fourth wife, Diane Passage, a former stripper. The assets sought by the U.S. include their Manhattan apartment and funds in bank accounts including one in the name of “Poledance Superstar.”
The victims of Mr. Starr’s alleged fraud aren’t named in the indictment.
Starr & Co. was a financial adviser to photographer Annie Leibovitz and actress Joan Stanton, the voice of Lois Lane in the “Adventures of Superman” 1940s radio series, according to various lawsuits. She died in 2009 at 94 after suing Starr in 1998 accusing him of misappropriating “tens of millions of dollars.
Mr. Starr was sued in 2002 by Sylvester Stallone, who claimed the financier’s advice caused him to lose $10 million on the stock of the Planet Hollywood theme restaurant chain.
Among the alleged victims was Rachel Lambert Mellon, the 99-year-old widow of philanthropist Paul Mellon, according to Alex Forger, manager of Oak Spring Farms and attorney for Mellon’s family-owned company, Oak Spring Farms LLC. Oak Spring lost more than $5 million to Mr. Starr’s theft, prosecutors said.
Other victims included former CEO Jim Wiatt of the William Morris Endeavor Entertainment talent agency and actress Uma Thurman, said people familiar with the situation. Another client was Wesley Snipes, who was convicted by a federal jury in Ocala, Fla., of failing to file income tax returns. Mr. Starr testified at Mr. Snipes’ trial.
Louisa Sarofim, heiress of the KBR Inc. construction fortune, and playwright Neil Simon were also clients, according to court papers in the Stanton suit.
Bloomberg contributed to this story.