A University of Minnesota law professor is accused of stealing more than $4.38 million from investors in a diamond company between 2006 and 2013.
Edward S. Adams was indicted Wednesday in U.S. District Court in Minneapolis on eight counts of mail fraud and six counts of wire fraud.
Besides the money he allegedly deposited in his own accounts, prosecutors say he quietly paid his own law firm, formerly Adams and Monahan, more than $2.54 million in addition to the $1.59 million the firm received in fees.
According to the indictment:
Adams got involved with Apollo Diamond, which created diamonds in a laboratory for industrial use and as gemstones, when the company hired Equity Securities to raise over $25 million for the company. Adams was one of Equity’s principals, and the company’s commission was over $3 million.
Apollo’s founder was Adams’ father-in-law, and he entrusted Adams with fundraising and financial decisions with little to no oversight.
Adams went on to work as Apollo’s chief financial officer, president and in other roles. His law firm also got the “vast majority” of its revenue representing Apollo.
Prosecutors say Adams took “advantage of the trust placed in him,” creating multiple personal bank accounts and depositing money intended for Apollo. He gave at least $1.4 million to LZ, a friend and former business partner, and more than $125,000 to his then law partner, Michael Monahan.
The diamond company struggled. In 2010, when an employee asked for $15,000 for Apollo’s basic operations, Adams said there was no money available. On the same day, he transferred $100,000 to his own account.
With investors growing angry, Adams and Monahan created a new company, Scio, which would buy Apollo and award new shares to the investors, so long as they promised not to sue.
Adams eventually raised the $2.1 million he said Scio was paying for the acquisition, and took most of the money for himself and his law firm.
“The former Apollo … shareholders now held shares in a publicly traded, operating company, which appeared to them as a better option than retaining shares in entities that they were informed were on the verge of insolvency,” the indictment reads.
“Adams’ plan succeeded, and he was able to avoid ‘potential massive litigation from disgruntled shareholders’ ” — quoting a letter Adams had written to his father-in-law — “and prevent investors from discovering that he had stolen millions of dollars of Apollo investors’ money, all while lining his pockets with additional money from new investors in Public Scio.”