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Friday, September 28, 2012
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This article was first published on a site dedicated to the Chicago municipal elections in 2011. Since the site has been taken down, I'm putting it up here now.
One night during the hey day of the refinancing boom, Alderman Walter Burnett, once a car thief and now the boss of the 27th Ward, was having a few drinks in the then new staple of Chicago’s nightclub scene Reserve, which just happened to be located in the West Loop neighborhood of his ward. It was relatively early in the evening. Not too many folks were yet around but one was the owner, Tony Demasi.
“Tony, I’ve got a great valet guy you can use,” said Burnett.
“Thanks sir, but I’m happy with my valet guy” Demasi responded.
“He is the valet guy all the businesses use in MY ward.” Burnett responded.
“My valet guy is also a friend of mine so I think I’m fine sir.” Demasi countered.
“Vlad will be here tomorrow at 6.” Burnett insisted.
Tony Demasi had a problem. He was being shaken down by an alderman who’d once stolen cars for a living. When Burnett was in his teens, he was the look out for a car theft ring. Upon getting out of Cook County Prison, he got into politics and was now an alderman. His story is generally viewed as one of redemption. Another way to look at it is that Burnett figured out that the real gangsters were in politics, and Demasi was getting a first hand look at this sort of gangsterism.
Furthermore, his club, Reserve, was in Burnett’s ward. Burnett was in position to make all sorts of trouble for Demasi. As an Alderman, if Burnett wanted to, he could shut down Reserve over any number of real and perceived violations. Demasi also had a built in solution. It was situations JUST LIKE THIS for which he had made friends with Outfit bosses like Rudy Fratto. The next night when Vlad arrived members of the Outfit let him know that he wasn’t welcome any more at Reserve. After a “meeting” between Vlad and Demasi’s Outfit friends in a Reserve bathroom, Vlad walked home, tail between his legs, and Burnett never attempted to fix up any more of his friends with jobs at Demasi’s Reserve.
From 2003 through March of 2007, Anthony Demasi burst onto Chicago’s socialite, business, and political scene. In fact, he was on the verge of taking it over. He owned two of the hottest clubs in the city, Reserve and Crescendo. He started a charity, the Tsunami Foundation, that offered mentoring programs in the inner city of Chicago and college scholarships to deserving seniors in high school, and he started a small hedge fund, Tsunami Lake Shore. He hung around with folks like Sarah Preston of Chicago Magazine, Marty Gutilla proprietor of Tavern on Rush, and Jim Deleo, Assistant Majority Leader in the Illinois Senate, commodities trader and club owner Jim Kaulentis, Pete Schiavarelli, the genius behind the band Chicago, and the insurance magnate Dickie Parrillo. He was even instrumental in first helping to elect Alderman Brendan Reilly of the 42nd ward the first time he ran in 2007. He was also knee deep in the notorious world of nightclubs and its connection to the Outfit and the seedy underbelly of Chicago politics. It’s a world known largely for bribes, kickbacks, rackets and other corruption.
Here’s how Demasi described his connection to Chicago’s cesspool of political connections. “Let’s just say, I challenge you to show me someone that owns a nightclub in this city without political access,” Demasi continued, “When you ask me about ‘immense wealth’ I feel that term is relevant to a person’s vantage point. I feel immense wealth is of course a term or perception, but I will say that Capital is key; undercapitalization would be one key I would look to in evaluating a failing club. “
All those years there were rumors, but initially the media treated Demasi as the fascinating upstart, the envy of everyone.
Then, in April of 2007, just weeks before his second club, Crescendo, was set to open, Anthony Demasi was charged with fraud by the Commodities Futures Trading Commission.
From that day forward, Demasi received nothing but negative press. Media from the Chicago Tribune to CNN has described this fraud as a “Ponzi Scheme.” For instance, this CNN story described the fraud this way, “Anthony Demasi of Tsunami Capital LLC, a trader in commodity futures, allegedly told investors that one of his trading pools made a profit of 172% -- an astronomical claim by any standard. In reality, the pool had no profit at all and was part of a multi-million dollar Ponzi scheme, according to the U.S. Attorney's office in the Northern District of Illinois. The feds say that Demasi poured much of the money into his Chicago nightclubs and blew the rest on gambling.”
That’s a characterization that Demasi vehemently denies, “Because it was not a PONZI scheme. In a Ponzi scheme, Money is not utilized on anything within the business as an investment. In this case there is something very valuable. It was not a scheme where money was just shuffled around to pay other back and siphon money out. Money was put towards a valuable entity…namely a very successful trading system.”
Of course, Demasi’s opinion doesn’t much matter any more since the media has determined he’s a villain. It’s ironic since there’s no evidence that Demasi was anything but a model citizen from April 2007 to the present. That included extensive cooperation with federal authorities including the US Attorney’s office, the FBI, and the SEC. This wasn’t the first time he cooperated with the Feds. In 1999, Demasi discovered a tax violation while interning at Bear Stearns, and he worked with the FBI to bring the facts to light. In fact, both his crimes and his shady dealings and connections all occurred while the media fawned. While his behavior has been exemplary since April of 2007, the coverage has been mercilessly negative.
April 2007 also marked the beginning of a fall even more epic than his rise. In February 2009, he’d spend forty five days in the worst part of the Cook County prison system, including five days in the Isaac Ray Center for Correctional Mental Health. Tsunami, including both Reserve and Crescendo, would be lost. He’d lose all his millions and then on July 2nd, 2010, Federal Judge Rebecca Pallmyer would sentence Demasi to five years in a federal prison. Meanwhile, Demasi attained many new friends during his rise and many of them rode his coattails to their own success. One by one, almost all quietly disassociated themselves from him once fell. The media couldn’t be bothered to ask of them why.
All throughout his magnificent rise, the media only dug skin deep. While he was knee deep in the underbelly of Chicago’s political system, and its even more notorious connection to Chicago’s nightclub scene as well as the Outfit, no media asked how Demasi so easily consistently attained multiple licenses necessary to open a club. Instead, he enjoyed nothing but glossy puff pieces. Then, following his indictment, the media turned.on him and treated him only as a villain. Only then did luminary John Kass start to question Demasi’s previous ability to get all these licenses. Meanwhile, coverage of the fraud amounted to repeating indictments, convictions, and prosecutor’s statements. As such, vital questions were never asked or answered in relation to the fraud. Yet, Assistant US Attorney April Perry said, “this case certainly is a public interest case” at his sentencing July 2nd. It was the enormous media attention that Demasi’s case drew that gave it “public interest”. So, presumably, if the media took so much interest, they had a duty to try and get it right. Yet, over and over, they only dug skin deep causing nothing but misperception.
Up until his conviction, Demasi could count on puff pieces like this 2006 Chicago Magazine profile, “Having a venture capital business and a nightclub means there is work that literally needs to be done 24 hours a day. Demasi has gotten good at delegating. But long hours have their rewards, in addition to the financial. Demasi, 31, is known for throwing after-hours surprise parties for friends, customers, and regular clients at the Park Hyatt, The Peninsula, and other swanky hotels. ‘I get a tremendous amount of pleasure from surprising people, entertaining people,’ he says.”
Meanwhile, Eoin Callery is a shining example of an individual that rode Demasi’s coattails on the way up but was allowed to quietly disappear once he fell. This is from a Chicago Social article in April of 2005, “Callery was working as a trader in 1999 when he met Demasi, then a law student at Georgetown University. ‘We had a lot of the same friends.’ Demasi explained. ‘I’d come to Chicago to visit and Eoin and I would end up talking for hours about clubs in Europe.’ In 2002, they created Tsunami Capital LLC., a small venture capital firm with a focus on the entertainment venues, and soon after the concept of Reserve came alive.
‘We researched clubs all over the world.’ Says Demasi, ‘On the plane, I’d be scribbling notes and ideas while Eoin would just relax and listen to music. He’d go through the same planning process only sleeping.’
At the time, Eoin Callery was all too happy to sit down for nice spreads and be called Demasi’s partner in Tsunami Capital. Tsunami Lake Shore, the hedge fund division of Tsunami Capital, would later be the subject of a 2007 Commodities Futures Trading Commission civil indictment. “Demasi convinced at least one prospective pool participant to invest by providing him with a false track record showing that Tsunami was profitable in all but two months in 2003-2004 and had its highest rate of return of 26.85% in April 2003. In reality, Tsunami did not have an active account in April 2003 lost money every month it traded in 2003, and did not trade at all in 2004.”
Both in Federal indictments and in press coverage, Callery’s never mentioned. As an equal partner he must either be a co conspirator, witness, or victim. It’s even more remarkable since Callery was a trader by profession. One would think that he’d know something about a commodities trading pool he’s an EQUAL PARTNER in. Yet, his name has been erased as though his partnership, once the subject of fawning press coverage, never existed with Demasi. When it was time to enjoy the perks of Tsunami Capital, Callery was out front declaring himself an equal partner. Yet, when that same Tsunami Capital is attached to fraud, it’s only Demasi that takes the fall and Callery is simply allowed to disappear with no explanation.
On his way up, one evening in particular summed up the perfect symbiosis that Demasi had created between his life and the press coverage it received. In the summer of 2005, Demasi’s Tsunami Foundation threw a party that encapsulated the symbiotic relationship between Demasi’s life and the treatment he received from the media. Tsunami Foundation was a charity that Demasi ran which gave mentoring in underprivileged areas and it also gave college scholarships to deserving youths. There was one particular shindig that was especially interesting. This one was held at the posh Chicago sushi restaurant, Japonais. That’s because while the usual list of celebrities, powerbrokers and socialites were at this party, so too were members of the Outfit. John “No Nose” DiFronzo was at this party. Rudy Fratto was there and his fourteen your old son, Rudy Jr., was receiving a scholarship even though the younger Fratto still had years before he’d attend college. No one was the wiser even though Sarah Preston covered the event for Chicago Magazine.
Just as Demasi showed capabilities in attracting positive press back then, he and his crew were also just as effective in not attracting any press when that suited them. In August of 2006, Demasi’s reserve was ticketed with twelve other nightclubs for their service of entire bottles to their patrons. That law would be changed quickly, quietly, and remarkably, and the following January then Governor Rod Blagojevich would sign a law that would suddenly make bottle service legal and the tickets null and void. Even though the appearance of corruption screams out in the set of events that started with the ticket and ended with the law being changed, not one media reported it as such when it happened.
In fact, the law was passed in both the state house and senate during veto session, normally reserved for for legislators to act on any changes the governor has made to bills they passed in the regular spring session. Furthermore, the sponsors of the bill in the Senate were Senate President Emil Jones, Assistant Majority Leader Jim DeLeo and John Cullerton. In the House, the second Republican Angelo “Skip” Saviano sponsored the bill. That’s a bi partisan collection of some of the most powerful politicians in the state of Illinois all sponsoring something as trivial as bottle service and doing it during veto session.
In fact, the bill was introduced, “debated”, and passed all in less than five minutes in the State Senate on November 16th, 2006. Prior to that, there was never one mention by anyone in the state legislature of making bottle service legal in the state of Illinois. In fact, the only two people to speak in the State Senate that day regarding this law were DeLeo and Cullerton. The debate amounted to Cullerton briefly explaining and defending the statute and then the chamber voted. That’s it. That was the entire so called legislative process for this bill and the transcripts of this sham continue to be available on the internet. Why would such heavyweights get behind something so trivial? Why would it be introduced and passed in veto session? Doesn’t this combination raise the appearance of corruption? Despite all these obvious questions, there’s not one media story about this bill from the time period it passed. It was only after Demasi’s indictment on fraud charges that Chicago journalism heavyweight, John Kass, took an interest in the law. Of course, that was well over a year after the fact.While on top, and when Demasi wanted it, he reached all corners of the socialite media world. Reserve became the premiere nightclub in Chicago and Demasi created all sorts marketing gimmicks that earned him press. One of the most famous was the $1000 Ruby Red Martini, a gimmick that earned Demasi and Reserve press from media as high profile as the USA Today and the New York Times, “GEORGE SANTIAGO, a 23-year-old nightclub promoter, wanted to impress Danielle DiCantz, 22, whom he had met at a club, on their first date. So on a recent Thursday night he took her to Reserve, a lounge and dance club that is a favorite of the trend-setting crowd here.
To break the ice, Mr. Santiago ordered a $350 bottle of Dom P?gnon. After they had swilled the Champagne dry, Mr. Santiago returned to the bar. This time he ordered her an exotic concoction called the Reserve Ruby Red.”
Often, marketing meant promoting his staff. It’s something Demasi learned first had from his mentor, Marty Gutilla. In the 1980’s, Gutilla ran the Chicago nightclub, Eddie Rockets. Gutilla’s chief bouncer at Eddie Rockets was Laurence Tureaud. Turead became a favorite of staff and guests and Gutilla promoted him throughout Chicago until Turead landed a spot in the national bouncer boxing tournament. While Turead didn’t win the tournament, he parlayed his exposure there into a long acting career and is now known as Mr. T.
Demasi did the same for his staff. One of his hosts, Anderson Bell, gained the reputation as the “most eligible bachelor in Chicago”, a reputation cultivated by Demasi. Meanwhile, Reserve bartender Danielle Day was AOL City Best’s Hottest Bartender of the Year for 2006. Prior to meeting Demasi, Day had a failed restaurant. Demasi marketed her as the ACE best in the business and turned her into a Chicago celebrity in the night club scene and that lead directly to this title in 2006.
In April of 2007, they took their cameras to Reserve for a feature about Day for AOL’s website. Day would eventually parlay the attention she received from her time at Reserve into a budding acting career. This particular feature focused on Day of course. Demasi himself mad a short appearance, but there’s also one more interesting person that made an appearance, Anthony Loquercio, identified as a “Reserve regular.” In the piece, Loquercio says, “I’d totally marry that girl,” of Day. That’s ironic since the two are now engaged.
In fact, Tony Loquercio, along with his brother Robert, were the two last people from Demasi’s 2003-2007 crew to still associate himself with Demasi after his indictment in April of 2007. That was a fact not lost on John Kass in this piece in October of 2007, “Demasi is out with no friends, except for the Loquercio brothers, Tony and Robert.” Loquercio was part of a crew of power brokers and politicians like commodities trader Jim Kaulentis, Le Passage proprietor Joe King, along with the aforementioned Gutilla and DeLeo that Demasi developed his circle of friends when he was riding to the top of that world from 2003-2007. All are conspicuously absent now that he’s fallen. None has ever been asked about this dichotomy.
Here’s how Demasi explains it. “That group of people looks at the world and who they associate with from what they or their business can gain from the association. My usefulness to those people ran its course,” said Demasi of his now past friendship with Gutilla, Kaulentis and DeLeo. He contined, “if you ask me about certain people, I can be more specific. You mentioned Tony Loquercio, I still believe he was a true friend at one time though we are not in touch any more. Other people you mention (like DeLeo, Gutilla, and Kaulentis) might have been more acquaintances than friends. Depending on your sources, things may have been omitted or exaggerated. I don’t consider any of these people to be bad people. We are just very different. My friends now are much closer to who I really am as a person.” That may explain why all three, who regularly dined with, spent time in Vegas, and otherwise regularly associated with Demasi, are now shunning him. What it doesn’t explain is why the media has never asked any of them about their former friend. The media breathlessly hyper analyzed the largely loose relationship between Barack Obama and the likes of Tony Rezko and Bill Ayers but DeLeo, among the three most powerful politicians in this state, is never once asked about his previous relationship with Demasi, now also a convicted felon.
While his former friends were allowed to fade away without notice, Demasi continued to receive no favors from the press. Considered a villain, Demasi only received negative press, even when the facts should have made Demasi the victim. In late 2008, his then girlfriend, Stephanie Abraham, charged him with biting her during an argument as well as breaking the air conditioner on her father’s car during the same argument. More than one outlet picked up the story when the charges were filed. None pointed out that Abraham had a history of drug and alcohol abuse including a DUI arrest at fifteen. What wasn’t mentioned was that the battery charges were all eventually dismissed by a Cook County Court after the prosecution insisted on a trial. . Meanwhile, Demasi only plead guilty to another set of charges after a corrupt judge named William T. O’Brien forced him to spend forty five days in the worst parts of the Cook County prison system and gave him a million dollar cash bond, assuring that Demasi would continue in jail indefinitely unless he plead guilty. While his initial arrest was reported, the full story has never been told until now.
The whole affair started on June 13th, 2008. That’s when Demasi was involved in a domestic incident with Stephanie Abraham. Demasi claims that Abraham was drunk that evening and attempted to drive. He says that he took her keys away which caused an argument. Meanwhile, Abraham would eventually accuse Demasi of biting her on the lip during the course of this argument and breaking the air conditioner on her father’s car, the car she was trying to drive. While the incident occurred on the 13th, it would be nearly three weeks before Abraham and her father formally filed charges. Demasi would formally turn himself in September of 2008. While John Kass and others have repeated the charge that Demasi did bite his girlfriend, there’s never been any photos, doctors reports, or other visual evidence that Demasi assaulted her on that night or any other night. Still, Demasi would face charges. Because the car was registered in Abraham’s dad’s name, Albert Abraham, the charges would be split into two. Demasi would face Judge William T. O’Brien on Old Orchard Road in Skokie to face criminal destruction of property charges. He would be in a court on Harrison Street in Chicago to face assault charges. Both cases would run simultaneously though, of course, not necessarily at the exact same time.
In October of 2008, Demasi was in his now former club, Crescendo, when in walked Stephanie Abraham. By then both judges had issued restraining orders against everyone involved and Demasi was to have no contact with either Abraham, and vice versa. Demasi sent Stephanie Abraham a text message demanding she leave the club immediately. She complied but reported the text message to both judges. At his next hearing in front of Judge O’Brien on January 9th, 2009, O’Brien considered the text message a violation of Demasi’s parole and raised his bail from $10,000 to $100,000. Fortunately, Demasi had a friend sitting in the court with cash for exactly such a moment and was able to pay it on the spot.
From there, things turned confusing, bizarre, and most of all totally corrupt. Demasi flew to Miami, Florida, where he maintained a second residence in a condominium. Coincidentally, the older Abraham also maintained a residence in the same complex. Two days later, the two would have a confrontation. Demasi would later report this confrontation to local police, “I was walking down to the cigar shop and as I was walking I had a feeling that someone was behind me. When turned around I saw him coming after me (Albert) flailing his arms. He hit me in the face I fell to the ground and hit the back of my head. I then got up and ran away from him as fast as I can.” Local police would arrest Albert Abraham later that day AND they’d also have to arrest Stephanie after she allegedly attacked, kicked, spit, and hit three in a state of inebriation while they attempted to arrest her dad. Even though Miami authorities clearly viewed Demasi as the victim and the Abraham’s as the aggressors in this case, Judge O’Brien took a totally different tack at Demasi’s next hearing on February 7th.
When Judge O’Brien learned of the incident, he was concerned that Demasi was traveling outside of Cook County without permission. This was a curious concern since not only had O’Brien given Demasi permission to travel to Miami but he even gave Demasi permission to travel to Miami on the day in question. Judge O’Brien was concerned because he believed that Demasi’s earlier violation of his parole lead by extension to revoking all travel outside the jurisdiction. In fact, Judge O’Brien once said to Demasi’s attorney, Steve Fine,“he blew that,” referring to Demasi’s permission to travel. Never during the course of the proceedings that day did Judge O’Brien produce a formal written revocation of Demasi’s permission to travel. That’s because there was none. Judge O’Brien appears to have on the spot decided that one lead to the other and apparently he thought that Demasi should have the powers of ESP and be able to read his (O’Brien’s) mind. When Fine suggested that this was a “technical violation”, O’Brien barked back, “It’s not a technical violation it’s a blatant violation. I remember having a conversation with him asking him whether or not he understood certain things and his position is he’s an attorney, he knows better.” He then raised Demasi’s bail from $100,000 bond to $1 million cash, or an increase of 10000%. A routine court proceeding was turning into an indefinite prison stay in the toughest prison in Cook County for Demasi. That’s because his $1 million cash bond would put him in a population full of murderers, rapists, and armed robbers, criminals who normally get such steep bails. Then, Fine asked for a 402 conference so that Demasi could plead guilty. Because Demasi had nothing as much as a parking ticket prior to this arrest, he would face a long probation at worst if he plead guilty. Judge O’Brien wouldn’t even allow Demasi to plead guilty however, “At this time the Court is going to refuse that request. Based upon my experience with Mr. Demasi and observing him on prior occasions here and knowing somewhat a little bit about the facts of the case as a result of various violations of bail bond requests for permission to travel. I think it behooves us that the Court has a doubt as to whether or not Mr. Demasi is fit to stand trial.”
This meant a mandatory forty five day stint in the toughest part of Cook County Jail. That stint would start at the Isaac Ray Center, or the looney bin portion of the Cook County criminal system. After all, those unfit to stand trial are those with serious mental diseases. There he was asked brain teasers like, “are you human.”
This bizarre set of events did catch the eye of Kass and he now infamously threw a shot across the proverbial bow to Demasi’s enemies while Demasi sat in prison. “And I don't want Demasi getting accidentally hit by a bolt of lightning or choking himself to death with plastic bags in the jail shower. That might ruin Chicago's reputation.” In that same piece, Kass also drew concern over the bail. He compared Demasi’s bail to that of accused killer, Concepcion Molina, who in 1979 received a $50000 bond (meaning he only needed to pay one tenth unlike Demasi who had to pay the entire $1 million) and walked out of court never to be heard from for three decades.
A few days later, after the Feds visited Demasi in prison and charged him federally for charges related to his fraud involving Tsunami Lake Shore, Kass wrote again and suggested that the bail made sense. “Like I said, it was strange. But it's all becoming clear to me now.
Because a few minutes ago, the U.S. Attorney's office indicted Demasi on charges that he defrauded investors at his Tsunami Capital investment company out of millions of
dollars.” Kass made a curious, and completely unverified link between Demasi’s enormous bail and his federal indictment.
dollars.” Kass made a curious, and completely unverified link between Demasi’s enormous bail and his federal indictment.
Maybe it was Kass’ retraction. Maybe it’s just the sort of media incompetence we’re all used to. Whatever the reason, no media was in the courtroom when Demasi faced O’Brien again. As such, the media missed the conclusion of O’Brien’s corruption. The first thing any media in the courtroom would have noticed would have been this, “Well it was odd, I was supposedly being prosecuted by the state yet two attorneys including one of the most well known politically powered attorneys, Tom Breen, was there representing the Abraham family. Albert Abraham waged a complaint against me because he said he was distraught over his broken “air-conditioner” (that I somehow magically broke) yet he hired two attorneys one that charges an initial retainer of multiple times more than the property he alleged I damaged. He kept throwing random charges at me until one stuck, weeks after the initial dispute. I would love for someone to examine the relationships between his attorneys and the court I was in front of as a defendant.”
It turned out that O’Brien was wrong in his interpretation of Demasi’s fitness to stand trial. According to a report filed on March 6th by Dr. Messina of the Cook County Clinical Forensic Services, Anthony Demasi was indeed fit to stand trial, making his MANDATORY forty five day prison stay ultimately unnecessary. Then, Steve Fine pointed out that Demasi’s parents had traveled from Michigan for the proceedings and appealed to his (O’Brien’s) compassion to reduce his bail. The prosecution tried to reference Demasi’s federal charges to which O’Brien contradicted Kass and said, “I am not considering the federal charges that is between him (Demasi) and the federal government if that ever happens. I am not considering that. “ In fact, if anything, it was the buzz from Kass’ original article, and the very provocative claim, that caused the Feds to indict Demasi then.
While Demasi’s federal charges weren’t weighing on O’Brien he also wasn’t feeling generous with bail, “bond is going to stand. It is a reasonable bond seeing that the Court clearly recalls admonishing Mr. Demasi to avoid contact with the victim in this case, and not two days after telling him that, him also having training as a lawyer, outright disobeyed a court order and went and left the jurisdiction. He is not above the law. He violated the terms of bond. Therefore, the Court has appropriately increased the bond to a million dollars cash. The bond is to stand.” While O’Brien had the power to keep the unreasonably high bail, he had no power to stop Demasi from pleading guilty. That’s what he did immediately upon realizing that if he maintained his innocence it meant a prolonged stay in the worst prison in Cook County. O’Brien gave Demasi two years probation and Demasi slept in his own bed that night. On June 25th, 2009, the court on Harrison dismissed all charges against Demasi stemming from the allegation that he bit his girlfriend. The judge was convinced to dismiss after Demasi was joined by twenty five supporters and two eye witnesses. Demasi has maintained his innocence from all charges related to all these events. The only evidence of his guilt is the guilty plea he agreed to when he realized that his $1 million CASH bond would stay for an indefinite period. None of this was ever reported by anyone even though it only took court transcripts to prove it.
In no part of Demasi’s story has the media coverage been more incompetent than in covering his actual crimes. All the public knows are the charges against him and his guilty plea. There’s absolutely no exploration about the set of events that lead to the crimes. For instance, the amount of his fraud according to the Feds was $4.7 million, a number Demasi disputes, but yet Reserve was already a very successful club when the crimes were alleged to occur. So, did he set out to commit fraud? Why would someone that owns a wildly successful club, one that could make mllions in a year, go out to commit that relatively small a fraud? Furthermore, in three of the five counts he plead guilty to, Demasi actually plead guilty by taking responsibility for the actions of an employee, unnamed. If Demasi is guilty because of the actions of this employee, certainly the employee themself is guilty as well. Yet, Demasi is the only one charged and convicted for anything related to this scheme. I asked him about this, “It is curious right?! We had around 200 total employees and contractors and I did business with 100s of people yet I am the only person they care about? But, I will say I would rather have it that way.
To have them say I am that proficient enough to structure, start up, manage and work at all departments of a multi faceted company worth hundreds of millions myself is quite flattering. Plus, I would not wish what I’ve been through on my worst enemy.”
Demasi explains his crimes this way. He started a hedge fund but shortly after made contact with a trader from Billings, Montana named Stuart Simonsen. Simonsen had a trading software system, referred to as a blackbox, that Demasi realized was worth hundreds of millions of dollars. Demasi decided that rather than trading commodities futures, he would use this hedge fund to sell this system. By doing so, he was committing fraud. Futhermore, he had an employee that made egregious and false statements in selling the fund, and, as CEO, he also took responsibility for those fraudulent statements. Still, he said he partnered up with Simonsen and sold the system to Tradelink, a Chicago private equity firm. Then, as he was about to be paid off, the CFTC charged him civilly, froze his assets, and then Simonsen proceeded to lie about their partnership, including under oath. This caused Demasi not to receive his rightful share of a significant pay off, and that’s the only reason that some investors are still owed money.
Yet, Stuart Simonsen and Tradelink are two names not mentioned in any media in relation to this case. The media has done this despite a series of court proceedings linking all three including at least one that’s available on the internet. In fact, the link between these three determines entirely whether it’s fair to call Demasi an out and out thief, or whether his crimes were the misuse of funds, still a crime, but for a purpose that was meant to make everyone, investors included, quite wealthy.
Stuart Simonsen, a trader from Billings, Montana who once was also sued for fraud, doesn’t deny knowing Demasi. In fact, in a CFTC deposition he admitted that he worked, at the time, for Tradelink and that he sold his trading software system to Tradelink. He further admitted that he was introduced to Tradelink, a private equity firm in Chicago, through contacts arranged by Demasi. He even admitted that Demasi introduced him to several other private equity type firms that also considered buying his system but didn’t. This system netted Simonsen somewhere in the neighborhood of $100 million. Yet, he also told CFTC attorneys that he and Demasi had no formal agreement for compensating Demasi for helping him in selling this system. Instead, he said, under oath, that Demasi leased his system and that all these introductions were made because Demasi was a couple months behind on payments, a charge Demasi denies. One problem with that assertion is that court records showed that Demasi had already paid Simonsen $2 million to supposedly lease the system. He said this even after being shown a copy of a contract with his signature, Demasi’s, and the signature of a representative of Tradelink. He claimed his signature was forged on multiple documents.
This is a rather curious story. After all, at the time all this purported to happen, Demasi was worth eight digits. It’s unlikely he would have trouble paying for the system. Furthermore, Demasi, by all accounts, was a savvy business man. Would he really do all that work to help secure a nine digit business deal just to catch up on a fifty thousand dollars of back payments after already paying approximately $2 million in payments? Furthermore, if Demasi was committing out and out fraud, why would he lease an expensive trading system? Wouldn’t that be an unnecessary waste of money if his goal was simply to deceive? Of course, Simonsen, who spoke with me but only off the record, never faced any scrutiny from either the media or prosecutors, and all these questions remain unanswered.
In fact, both Tradelink and Stuart Simonsen became integral figures at Demasi’s hearing on July 2nd. Both Demasi and his attorney, Mark Rotert, stated that Simonsen committed a fraud upon Demasi exponentially larger than Demasi’s own fraud. According to both, as a result of this fraud, not only did Anthony Demasi himself not make tens of millions of dollars but it also kept the victims of his own crimes from receiving payment. According to both, Demasi and Simonsen were partners in a blackbox trading system that Simonsen had developed. Both claimed that Demasi was integral in selling, packaging, and marketing this system to Tradelink for more than $100 million at the end of 2006. The only thing that Simonsen wanted on the record was a court ruling in Yellowstone County in front of Judge Richard Fagg on May 20th, 2009. That ruling, a summary judgment that ruled in favor of Simonsen, made all contracts that purported to show a partnership between Demasi’s Tsunami and Simonsen and the black box system that was sold to Tradelink. One thing Simonsen didn’t mention however was that this case was largely decided during the period that Demasi was incarcerated on the orders of Judge O’Brien.
Still, even after this ruling Demasi continued to maintain that he and Simonsen were partners, an assertion he made under oath later in 2009 in the same Dirksen Federal Building in which he was ultimately sentenced in. While his crimes carry serious sounding terms like wire fraud, two charge he didn’t plead to was perjury and forgery. If you believe Simonsen’s story, Demasi also committed those two crimes. It’s interesting that Demasi didn’t plead to either because, from the beginning, on all the charges he did plead guiltyto, the Feds had an air tight case. To Demasi this dispute is central to not only deciding his fate but everything surrounding his hedge fund, “It would change everything…forget about perception, the investors would be paid back in full with a nice profit and I would have an extra $50 to $90 Million left for go on vacation.”
The prosecution didn’t say that Demasi was lying. Instead, April Perry said that Demasi hadn’t brought them enough evidence to bring charges against Simonsen. What evidence did Demasi give them? Here’s what he told me, “I provided signed contracts, emails, text messages, and a wired conversation of a recorded phone admission proving that he was lying. Most recently a fax header from the faxed copy of the original contract and the signed Letter of Understanding in original ink with his and my and 3 other names signed on it as witnesses. On top of that I provided a federally taken deposition under oath of a third party the corroborated my exact story.”
Furthermore, I’ve spoken with a source that wishes to remain anonymous that also disputes Perry’s characterization. He says that he was involved in selling the black box trading system on behalf of Demasi’s Tsunami Lake Shore and that Demasi and Simonsen attended dozens of meetings in which each referred to the other as a partner. Furthermore, this source says he was deposed by CFTC attorneys and said all this under oath. He further told me that he provided these federal attorneys with a stack of business cards of business folks he sat down with, along with Simonsen and Demasi, that could verify that each referred to the other as a partner. He also provided me dozens of documents related to the eventual sale, including personal financial statements of Simonsen, asking rhetorically, “if I’m lying, how do I have all this?”
That seems to be an overwhelming amount of evidence. In fact, Perry acknowledged knowledge of my source but said that the CFTC deposed him not the US Attorney’s office. Of course, there’s no reason her office couldn’t have issued a subpoena for his testimony if they had wanted it.
I pointed this out to Perry but just as things were getting interesting, Randy Samborn, spokesperson for Pat Fitzgerald’s office, stepped in, “this interrogation is over,” referring to my questions.
The US Attorney’s office didn’t actually settle anything. In fact, there’s more questions than answers. I’ve spoken with Demasi a number of times. He admitted his wrongdoing, misuse of funds without the proper disclosure forms, but he’s adamant that Tsunami Lake Shore was real and that he had a real partnership with Simonsen. Simonsen refused to say anything on the record and would only point to a Yellowstone County ruling in his favor. My source also spoke freely though he didn’t want his name in the paper. Meanwhile, after five questions, the US Attorney’s office considered all these questions an “interrogation.” Who would you believe?
Then, there’s the victims. There were only two victims that would go on record and put their name behind their stories. One was Rocky Nendza, a commodities trader. Nendza attended Demasi’s March 10th, 2010 hearing at which Demasi plead guilty to five counts of fraud related charges. Nendza says that he invested $104,000 in Tsunami Lake Shore. Upon receiving his first statement, he says that he found the returns too good to be true. He then asked for his money back from Demasi. He said that he received a check that bounced but after months of hassles he said all the money he asked for, $100,000, was wired into his account. Nendza considered the matter closed when we spoke outside the hearing.
The other was Marko Ouzounian. Ouzounian was the only victim to speak in person at Demasi’s hearing on July 2nd. Ouzounian didn’t specify how much money he lost as an investor in Tsunami Lake Shore though he indicated it was sizeable. Yet, Marko Ouzounian didn’t come to court that day to act as the face of the victims asking for maximum punishment. Instead, he came in support of Demasi. “Tony’s (Demasi) actions were NOT malicious,” Ouzounian said. He continued, “why is he the only one facing charges?” Ouzounian continued, “while Tony’s (Demasi) actions may not have been wise, he has taken accountability and has tried desperately over the months to fix the situation. He has remained in Chicago. He has answered questions.”
It’s not everyday that a victim comes to sentencing to speak on behalf of the defendant. That’s what happened in this case. Yet, that fact was missing entirely from all coverage of Demasi’s sentencing hearing. Furthermore, if you’re looking for old ladies and other sympathetic victims, you won’t find them in this case. This was a hedge fund, a sophisticated investment. It’s one that millionaires invested in. Yet, despite cooperating with federal authorities throughout, the US Attorney’s office asked for the maximum sentence at his sentencing.
All of this is central to Demasi’s crimes and, by extension, his punishment. If Demasi is telling the truth, there are significant consequences for all involved. First, it means that Demasi not only owns part of the profits from the sale of Simonsen’s trading system to Tradelink, but he also is entitled to his share of future intellectual property if it’s sold to anyone else. This means that not only could his own fraud really amount to zero dollars legally AND he’s also been defrauded by at least one hundred million dollars. The only reason that there are any victims is because the Feds stepped in weeks before all would have gotten a pay off and charged Demasi with fraud keeping him from getting his share. Meanwhile, after the fact, Stuart Simonsen committed perjury, and the Feds didn’t charge him with it. As such, Anthony Demasi was kept from $50-100 million, the amount of his share of the deal that Simonsen now enjoys with Tradelink. Demasi was even more forceful on this point, “I will agree to spend the rest of my life in prison if any part of this is untrue. The system was real, the deal was consummated, and it is all very provable.”
Furthermore, while the government maximized the punishment in his own case, they simply refuse to prosecute a fraud exponentially as large as his own. Because Demasi is viewed as villain, such questions, or articles that explored these possibilities, would be considered bad form.Demasi’s story ended with one last explosive revelation. On the eve of Demasi’s sentence, John Kass broke explosive news. “Anthony Demasi, former owner of Chicago's hottest nightclubs Reserve and Crescendo, has been wearing a wire for the FBI, according to court documents filed this week in his unrelated fraud case.
The news that smooth-talking Demasi has been wired up — helping the FBI on several different investigations — surely must give bad agita to his pals in the Viagra Triangle.”
It was an article that Demasi’s attorney would refer to as “the 800 pound gorilla in the room” during the hearing the next day, July 2nd. That’s because Kass discovered that US Attorneys were planning on minimizing his cooperation claiming that his cooperation didn’t lead to any arrests.
That’s exactly what happened on the 2nd of July. Assistant US Attorney April Perry argued vociferously that Demasi’s cooperation was of limited value often claiming that it lead to no convictions. She blamed Demasi saying he was a “compromised witness.” Of course, it’s not entirely clear who’s fault it is that there were no direct arrests or convictions. If the Feds have you wear a wire, I would hope that it’s because they’ve developed a detailed case. Frankly, if Demasi was as compromised as the AUSA, April Perry, claimed then someone should be fired for greenlighting that particular operation. In fact, one could reasonably argue that if Demasi was wearing a wire, he was more than cooperative enough to warrant special consideration by the Feds during sentencing. Had he been discovered, it’s not only possible, but almost certain, he would have been killed. So, why was AUSA April Perry so adamant he receive 84 months, and why did no media, until now, question the harshness of her tone?
In fact, what really did Demasi in was a series of emails he sent one night to a casual female acquaintance. The reason these emails were discovered at all was because she, herself, got busted by the Feds and shared them hoping to score points herself. So ironically enough, her own cooperation with the Feds was used to minimize, by the same Feds, the cooperation of Demasi. They were introduced to the court on the eve of his sentencing, coincidentally or not, right after Kass began making phone calls and inquiries about the wiretaps. Demasi was none too happy about what transpired, “They lack foundation, do not have the entire chain of conversation, are contextually very limited, and can easily be refuted. The conversations were casual in nature, and, in the gambling scenario, they are filled with humor and done on almost every tv and radio station across the country. As for the drug part, she was asking me to loan her some aderol, a drug both of us take with a doctor’s prescription, until she got a new prescription filled. I refused politely by saying I was out but offered her another way which was seeing a doctor I know that normally prefers drugs over therapy. I have never sold or helped sell a drug in my life. This is a classic over reaction by a prosecutor and should have been viewed for what it was. The worst part is that it was unacceptable for those to be allowed into evidence at such a late date. It was a personal communication that was turned in the day before my sentencing and only shown to my lawyers later that day.”None of that was explored in the coverage. Instead, all the Tribune said was this in their Chicago Breaking News section, “Perry showed the judge e-mails written by Demasi to a friend in January in which he described a sports-betting scheme that would "eliminate risk" and guaranteed proceeds of up to $3,000 a week. Demasi also suggested he could provide the friend with prescription drugs, Perry said.‘Obviously, this is not the kind of behavior the government wants to see in a cooperating witness,’ she said.”
Over Demasi’s objection, his attorney, Mark Rotert, neither objected to the introduction of the emails entirely nor did he ask for a continuance to properly prepare for them. (since they were introduced late) Instead, they were offered into evidence without explanation and Judge Rebecca Pallmyer called them “disturbing,” right before rendering final judgment on Demasi’s sentence.
Meanwhile, all the Sun Times did to cover the hearing was run a story titled, “Former Nightclub Owner Who Ran Ponzi Scheme Gets Five Years.” The local Fox affiliate ran a similar story. They ran this headline even though the word “Ponzi Scheme” wasn’t uttered by anyone in that courtroom that day. In fact, the US Attorney’s office had long stopped calling the fraud a “Ponzi Scheme” by the time Demasi was sentenced. Stuart Simonsen and Tradelink were also both omitted from any coverage of the case even though they were mentioned by Demasi, his attorney Mark Rotert, Perry, and even by Marko Ouzounian.
John Kass finished one of his columns on Demasi this way, “So this is no fairy tale. But before it’s over, I’ve got a hunch it’ll be one heck of a story.” He started another, “If what is happening to top Chicago nightclub impresario Anthony Demasi were a movie being filmed here, with Chicago Outfit, gambling collectors and politicians, saloon keepers and guys from City Hall as characters.” A movie, a heck of a story, those are the characteristics of something the media would normally find newsworthy. So, there’s a burning question. Why then has the media consistently gotten it all so wrong?