Prosecutor closes book on BSU investment scam

MUNCIE — A former Ball State University employee who invested $13.1 million of the school's money with two networks of criminals and schemers will not be prosecuted.

After criminal investigations of Gale Prizevoits by federal prosecutors and the Indiana Secretary of State produced no charges against her, the case wound up in the hands of Delaware County Prosecutor Jeff Arnold.

“While Ball State University was hopeful that other criminal charges could have been brought forth, after careful consideration with regard to the incident of investment fraud at Ball State University, including a summary report from the Indiana Secretary of State's securities division, no additional charges will be filed," Arnold  said in a statement to The Star Press. "Based on extensive reviews of all the records available via subpoena, there does not appear to be any evidence of violations of the Indiana Uniform Securities Act.”

Prizevoits, who changed her last name to Cistrelli after marrying a Ball State official and moving to Florida, was the university's director of cash and investments before being fired in 2011 for dishonesty, deceit, incompetence, neglect of duty, gross misconduct  and willful disobedience of BSU's investment policy.

"While the university continues to recover from the impact of this crime, it appreciates all that law enforcement officials did to bring this matter to resolution and respects the decision of the prosecutor,"  Ball State spokeswoman Joan Todd said in a statement. "The university also recognizes that significant resources already have been deployed to obtain the $1,516,295 in restitution received by the university, and that any additional attempts to obtain further restitution from any other individuals would be futile. The university now considers this matter closed."

Asked why the university didn't sue Prizevoits, Todd said, "… as has been previously noted, there has never been any evidence that she personally profited from the fraudulent investments. Further, there is no information to suggest she possesses assets that would justify further expenditure of university resources in this most difficult matter that continues to sicken all of us."

Prizevoits made the investments in 2008 and 2010 in highly risky collateralized mortgage obligations (cash flows from large pools of home mortgages) and supposed U.S. Treasury STRIPS. To avoid detection by superiors and auditors, she altered records, conducted university business on her private email account, and secretly signed contracts.

The money was lost to criminals and others who spent some of it on luxury cars and beachfront property in Florida, townhouses in Bronx, N.Y., and Mickey Mantle and Mike Tyson memorabilia. Some of that property has been seized and sold by federal authorities who used the proceeds to make restitution to Ball State.

Seth Beoku Betts of Florida pleaded guilty in federal court in Manhattan to securities fraud, and George Montolio of New Jersey pleaded guilty to wire fraud. Others whose names were linked to the scandal included Beverly Hills attorney Jon Divens, who was later disbarred, Rabbi Fishel Todd, Lakewood, N.J., who later pleaded guilty to defrauding Facebook investors, and George Charles Cody Price, co-host of a San Diego radio station's "Wealth Weekend Hour," who was later sued by the Securities and Exchange Commission for alleged fraud.

When news of the scandal finally broke in 2014, Ball State officials said they planned to turn evidence over to Arnold to see whether Prizevoits or others committed any state crimes.

In February of this year, Arnold told The Star Press: "The securities division merely found no security violations. However, I am investigating whether or not other crimes may have occurred  within our jurisdiction. I consider this an ongoing investigation and won't release any further information."

This past week, Arnold declined to comment on his investigation of the scandal beyond issuing his statement.

Legal experts have told The Star Press that complex, technical, financial crimes generally are more likely to violate a federal statute and be prosecuted federally. But they said potential charges against Prizevoits could include false reporting, forgery, fraud, obstruction of justice, unauthorized control (theft) of BSU funds and deception.

Indiana's deception statute reads, "A person who misapplies entrusted property, property of a governmental entity, or property of a credit institution in a manner that the person knows is unlawful or that the person knows involves a substantial risk of loss or detriment to either the owner of the property or to a person for whose benefit the property was entrusted, commits deception."

However, deception is a misdemeanor and the statute of limitations for it is two years.

In a private email to one of the schemers, Prizevoits in 2010 claimed she was out to prove that Ball State's investment policy was too conservative. However, sources say in schemes like this that aren't foiled, kickbacks occur and she could have written the 2010 email just to cover her tracks.

During a budget hearing in 2015, state Rep.Terry Goodin, D-Austin, referred to Prizevoits as "that lady that stole the money." Goodin told then-BSU President Paul Ferguson, "I'm begging you to hold her accountable."

While Arnold declined to comment beyond his statement this week, in the past he told The Star Press that "the real question in this whole case should be why the feds did not pick up Prizevoits. What have they done with their investigation of her? Was she not a big enough fish? I don't know because I have never seen one piece of paper on an investigation. Nothing."

On another occasion, Arnold told The Star Press: "I would like to see her prosecuted as well as any other taxpayer, but somebody has to give me a case. First, I have to have a victim that is willing to cooperate with an investigation. We prosecute everything we can when there is a case brought to us that rises to the level of probable cause, but we don't go out and chase cases, particularly when there has been a federal investigation of this magnitude."

Contact Seth Slabaugh at (765) 213-5834.