By Martha Graybow
NEW YORK (Reuters) - A defense lawyer for the head of a suburban New York City private investment firm accused of swindling clients in a Ponzi fraud denied on Thursday her client was engaged in plea discussions to resolve the case.
Nicholas Cosmo, chief executive of Agape World Inc, has been jailed since his January 26 arrest for allegedly defrauding clients who had put $370 million in his investment operation.
Court papers filed on Wednesday by federal prosecutors included a document to be submitted to the judge in the case saying the government and the defense "are engaged in plea negotiations, which they believe are likely to result in a disposition of this case without trial."
Defense lawyer Stacey Richman said no such discussions had begun.
"We have not yet engaged in plea negotiations," she said.
She said both sides were still investigating the case and had only jointly agreed to extend by 30 days a late February deadline for the government to seek a federal grand jury indictment against Cosmo. A court conference on the matter was set for Friday.
Richman had written in a separate court filing on Wednesday that 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." She declined to elaborate to Reuters on what kind of disposition was possible.
A spokesman for the U.S. Attorney's Office for the Eastern District of New York, which is prosecuting Cosmo, declined to comment on the accuracy of the government's court filing mentioning plea negotiations, or any details on the case.
The purported scheme is one of a string of such Ponzi scams U.S. authorities say they have uncovered during 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 high 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 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)