- Associated Press - Thursday, December 16, 2010

NEW YORK (AP) - A former lawyer for a financial adviser to celebrity clients was arrested Thursday on money-laundering charges filed in New York alleging he helped conceal the adviser’s Ponzi-like scheme.

Attorney Jonathan Bristol pleaded not guilty Thursday in federal court in Manhattan. He was released on $1 million bond.

An indictment alleges that Bristol hid investor money stolen by Kenneth Starr _ a one-time adviser to Wesley Snipes, Sylvester Stallone and Martin Scorsese _ in secret escrow accounts.

Prosecutors say Bristol raided the accounts in January to pay $1 million to settle a claim by a disgruntled Starr client. They say another $100,000 was used to cover bills from Bristol’s law firm.

In April, Bristol also used the escrow accounts to help Starr siphon $7 million in investors’ money to buy Starr a five-bedroom, six-bath condominium, the indictment says. Prosecutors had previously alleged that $5.75 million of the total was stolen from a 100-year-old heiress.

“A professional, such as an attorney, cannot knowingly use an escrow account funded with illegally obtained money, or look the other way without questioning where the money came from,” Charles Pine, head of the Internal Revenue Service’s investigation unit in New York, said in a statement.

In a related civil lawsuit filed Thursday, the Securities and Exchange Commission accused Bristol of aiding and abetting Starr’s scheme by allowing Starr to use his attorney-trust accounts as conduits for the money stolen from clients.

The SEC is seeking unspecified civil fines and restitution from Bristol, and to bar him from practicing in the securities area.

In September, Starr pleaded guilty to cheating wealthy and elderly clients out of tens of millions of dollars by secretly diverting their money into risky investments or into his own pockets. He admitted defrauding them since 2005, losing between $20 million and $50 million of their money.

There’s no indication Snipes, Scorsese or Stallone were victims. An IRS criminal complaint said cheated clients included a former hedge fund manager and well-known philanthropist, an actress who was a longtime friend of Starr‘s, a former talent agency executive and his wife and a prominent jeweler with a flagship Manhattan store. They were not identified by name.

One of several bank accounts linked to Starr, whose wife is a former stripper, is held under the name “Poledance Superstar,” an indictment says. The government is seeking forfeiture of that account and several others.

If convicted, Bristol faces a maximum 20 years in prison.


Associated Press writer Marcy Gordon in Washington contributed to this report.

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