By Martha Graybow
NEW YORK (Reuters) - The head of a suburban New York City private investment firm accused of swindling clients in a multimillion-dollar Ponzi fraud is in plea discussions to resolve the case, according to court papers.
Nicholas Cosmo, chief executive Agape World Inc, has been jailed since his January 26 arrest for allegedly defrauding clients who deposited $370 million in his investment operation. Court documents filed by federal prosecutors and a defense lawyer show they are in talks that could result in a guilty plea by the money manager.
The two sides "are engaged in plea negotiations, which they believe are likely to result in a disposition of this case without trial," according to a court filing on Wednesday submitted by prosecutors.
The filing was a proposed order to the U.S. District Court in Central Islip, N.Y., to extend by 30 days a late February deadline for the government to seek a federal grand jury indictment against Cosmo.
Cosmo's lawyer, Stacey Richman, in a separate court filing, said her client had agreed to the delay "so that the defense and the government can engage in further discussions about the disposition of this matter."
Richman replaced Cosmo's first defense attorney, Steven Feldman. She was not immediately available for further comment on Thursday. A spokesman for the U.S. Attorney's Office for the Eastern District of New York, declined to comment.
The purported scheme is one of a string of such Ponzi scams that U.S. authorities say they have uncovered in the economic downturn. In a Ponzi scheme, money from newer investors is used to pay earlier investors. Such scams typically collapse when new funds dry up.
Federal prosecutors, the FBI and the U.S. Postal Inspection Service said Cosmo lured investors with the promise of lofty returns from short-term loans extended to businesses, but in reality he made very few such loans.
They accused him of spending investor funds on personal expenses, including more than $212,000 in court-ordered restitution following a prior fraud conviction.
Cosmo has been in custody since his arrest. U.S. Magistrate Judge E. Thomas Boyle has ruled that Cosmo is entitled to bail, but said a proposed $750,000 bail package previously offered by the defense was inadequate and needed revision.
The Commodity Futures Trading Commission also has brought civil charges against Cosmo and his Agape firm.
The case is USA v Nicholas Cosmo, Eastern District of New York, No. 09-M-0066
(Editing by Andre Grenon)
