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Church investment scam alleged

June 25, 2008|Kim Christensen | Times Staff Writer

An Italian businessman known for dating actress Anne Hathaway and clashing with billionaire Ron Burkle was charged Tuesday with bilking investors out of millions of dollars on promises to buy Catholic Church properties on the cheap.

In a 12-count criminal complaint filed in federal court in New York, Raffaello Follieri, 29, was charged with wire fraud and money laundering. Prosecutors said in court that investors lost as much as $6 million.

The complaint accused Follieri of convincing investors that he could use his connections to the Vatican to buy the properties at below-market prices.

Instead, he allegedly used the money for his lavish lifestyle, spending on such luxuries as expensive restaurant meals and clothes, a dog-walking service, vacations, private-jet trips and a $37,000-a-month apartment overlooking Rockefeller Center in Manhattan.

"In addition, Follieri falsely represented that hundreds of thousands of dollars were transferred to Italy for 'engineering reports' relating to real estate when, in reality, the money was used for purposes other than the reports," according to an FBI agent's affidavit filed with the complaint.

The alleged scam covered a two-year period ending about June 2007, prosecutors said.

Follieri, of Foggia, Italy, was arrested Tuesday and did not enter a plea at his initial court appearance. A U.S. magistrate judge ordered him released on $21 million bail, to be secured by cash and property, and said he could not leave Manhattan.

Follieri allegedly convinced an unnamed "principal investor" and others that he had met with the pope and that "the Vatican formally appointed him to manage its financial affairs," according to the affidavit.

Prosecutors described the principal investor as "a private equity investment company with its headquarters in California" and said it "managed the investment of millions of dollars, including a significant amount of money from pension funds."

That description could fit Burkle's Yucaipa Cos. in Los Angeles, a unit of which sued Follieri Group in April 2007 for allegedly misusing some of the $55.6 million it had invested in a joint venture to develop former church properties.

The Yucaipa lawsuit alleged that Follieri spent the money on jets, a penthouse and his then-girlfriend, Hathaway, star of such films as "The Devil Wears Prada" and the just-released "Get Smart." The couple was widely reported to have broken up recently.

A Yucaipa spokesman did not return a phone call Tuesday.



Bloomberg News was used in compiling this report

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