Providence Financial investigation grows; bankruptcy case gets underway

Providence Financial CEO Antonio Buzaneli in a Providence promotional video.
Providence Financial CEO Antonio Buzaneli in a Providence promotional video.

Some flew in from Puerto Rico; others drove from Texas. They were among about two dozen creditors of Providence Financial Investments who made their way to Miami this week for a public proceeding in the federal bankruptcy case against Miami-based Providence, which allegedly took in millions of dollars from hundreds of investors from around the world before declaring itself insolvent.

During a two-hour session at Monday’s Meeting of Creditors, Providence Financial’s Chief Restructuring Officer answered questions from lawyers and creditors. When Giselle Santana prepared and signed the bankruptcy documents for the company, which filed for Chapter 7 bankruptcy protection on July 28, the CRO had been employed by Providence for only a few weeks, she told trustee Maria Yip. Her previous experience in corporate financial analysis was limited to work for a couple of small businesses in 2013, she said, and she had no experience with investment funds.

Santana also testified that she was hired by Antonio Buzaneli, Providence’s CEO, in early July for a one-time fee of $7,000 to review the company’s books and make a recommendation to the company going forward, but said she was provided very limited financial documentation that went back only to 2015. When she asked about previous years — Providence has been accepting U.S. investors’ money since at least 2013 — she said she was told by Buzaneli that there aren’t any other financial statements.

[Read more: Providence Financial files for bankruptcy protection]

Even with the limited information, Santana said she could see “nothing in this company is working” and recommended the company file for bankruptcy protection. Buzaneli was not present at the proceeding. That disappointed some of the creditors who attended, looking for answers.

“It’s kind of pointless asking questions ... She doesn’t know what she is talking about, she doesn’t know how to do research, she doesn’t know how to find out anything about the company — she made no effort to do so,” said Steve Lambert, an investor who traveled from Washington state.

Santana’s hiring followed a move to shut down the company in June by the U.S. Securities and Exchange Commission, which called the investment scheme involving factoring in Brazil an “ongoing fraudulent and unregistered securities offering.” The securities that offered annual returns of 12 percent to 13 percent had not been registered with the SEC, and brokers selling them were unregistered, the agency said in its complaint seeking a jury trial.

According to the SEC, Providence hasn’t accounted for the money it has collected — about $64 million in U.S. investors’ money alone — and its poor financial condition wasn’t disclosed to its investors, even as the company continued to solicit the additional money by more than 400 investors around the country.

This week, the SEC said it obtained an emergency court order prohibiting Buzaneli from leaving the United States until further order of the court. The court order issed by the District of Minnesota also freezes his assets and requires Buzaneli to provide an accounting and to repatriate all his assets to the United States. This follows the SEC amending its civil complaint against Providence to include Buzaneli as an additional defendant. The SEC’s investigation is continuing.

In the bankruptcy case in the Southern District of Florida, Santana amended the bankruptcy filing Aug. 11 to add more creditors and more liabilities but there were still no assets listed. Creditors have until Nov. 28 to file a proof of claim form.

Most of the U.S. creditors are from Puerto Rico and Texas, although a couple dozen live in South Florida. The Miami Herald has heard accounts from 11 families who invested most of their life’s savings. One retired couple said they lost their entire retirement nest egg of $700,000. “All of our IRAs, our savings, it’s all gone,” said another retiree who invested about $500,000 with Providence.

Meanwhile, international attention is growing as the SEC works with international authorities in global locations where Providence had offices and affiliated companies. In Guernsey, a resort island owned by the British crown, the court last week ordered that Providence Global Ltd — the local affiliate of the Miami-based company — to be compulsorily closed , a form of bankruptcy, after the company was found to be insolvent. Also, the London-based Financial Times reported that a Providence-affiliated company was selling an unregulated mini-bond product to as many as 800 investors in the United Kingdom.

[Read more: Investigation into Miami-based Providence Financial expands globally]

This story was updated Sept. 2 with SEC developments.

Nancy Dahlberg: 305-376-3595, @ndahlberg.