A Boardman man and former public official pleaded guilty in federal court to defrauding more than 10 investors out of nearly $1.2 million between 2011 and 2014 and to related tax-law violations.
In a case investigated by the FBI and the IRS, George N. Krinos pleaded guilty Thursday to the two counts in a criminal information charging him with engaging in securities fraud and willfully failing to collect and pay taxes for his employees.
In the 17-minute arraignment, he appeared before U.S. District Court Judge Dan Aaron Polster, who will sentence him at 1:30 p.m. May 30.
Krinos was Campbell’s mayor from December 2009 to January 2011.
He signed a waiver of grand jury indictment and agreed to be charged in an information.
The 15-page information says Krinos, through Krinos Holdings, sold securities through false and deceptive practices to numerous victims in northern Ohio.
These securities consisted of debenture notes and private-placement memoranda that were not properly registered with the U.S. Securities and Exchange Commission.
Krinos, 39, sold the securities under the pretense that his investors’ funds would be used for legitimate business purposes, including to provide venture capital to various client companies seeking funding from Krinos Holdings.
Krinos, instead, used the money for personal expenses and to engage in unauthorized foreign-currency transactions, the U.S. attorney said.
Krinos promised that initial investments of 10 cents per share would rise in value to as much as $5 or $6 per share.
Krinos also falsely told investors and others he managed about $600 million in an investment account when he, in fact, had only $5 in the account, the U.S. attorney said.
The information further says Krinos submitted falsified letters and statements to reflect high balances in his accounts.
Krinos also falsely told investors they were making high returns on their investments and that his relationships with the client companies were on good terms.
Contrary to his representations to his investors, Krinos actually used their funds for his personal use at restaurants, bars, casinos, adult-entertainment clubs and hotels, the U.S. attorney said.
Rather than disclose these personal expenses, Krinos later characterized them as “sales and marketing” costs in a budget given to his shareholders at a meeting in Boardman in 2013.
The information says Krinos improperly withheld taxes, including federal income taxes and Federal Insurance Contribution Act taxes from his employees, without paying those taxes over to the Internal Revenue Service.
Over about two years, Krinos improperly withheld and kept about $91,495 of his employees’ tax contributions from the IRS, the U.S. attorney said.
“This defendant lied to investors as means to fund a lavish lifestyle for himself,” said Carole S. Rendon, U.S. attorney for the Northern District of Ohio.
“Krinos’ victims not only include those who entrusted their financial assets to Mr. Krinos, but his employees and the taxpayers whose payroll taxes were squandered to further his personal gain,” said Troy Stemen, acting special agent in charge of the Cincinnati IRS office.
Although the criminal information wasn’t filed until Jan. 3, the Securities and Exchange Commission issued a statement about Krinos more than two years ago. That commission filed a document in October 2014 saying Krinos deceived investors and made unregistered stock sales through Krinos Holdings.
The document said Krinos spent more than $50,600 of the money in 2012 and more than $35,000 of it in 2013 at casinos and strip clubs.
Krinos Holdings was founded in 2012 to provide money to startup companies but never gave them any, and Krinos never told investors their money was being used for his personal expenses, the SEC report said.