Burt Marshall was barred from 2 banks, investigated by feds years before $92M bankruptcy

Syracuse, N.Y. -- Madison County landlord Burt Marshall was “evicted” from two banks and investigated by federal agencies, including the FBI, years before he filed one of the largest bankruptcies in Central New York history, a new court filing has revealed.

Court-appointed Chapter 11 trustee Fred Stevens, who has accused Marshall of running a massive Ponzi scheme, said in the filing that he learned of the banks’ actions and the federal probe through documents in Marshall’s financial books and records.

Marshall was “effectively evicted” from Alliance Bank on or around June 30, 2011, and prohibited from banking there, according to Stevens. Then, around Feb. 3, 2015, Marshall was “effectively evicted” from Oneida Savings Bank and prohibited from further banking there, the trustee said.

In addition, Marshall “was subject to some form of an investigation by the United States Attorney, Federal Bureau of Investigation, the Department of the Treasury, and/or the New York State Dept. of Financial Services in or around 2013,” Stevens said.

The trustee said he has been unable to discover much about what prompted the banks to bar Marshall from ever doing business with them again or what exactly prompted the probes by the federal agencies and possibly a state agency.

Marshall filed for protection from creditors under Chapter 11 of U.S. Bankruptcy Law on April 20, 2023. He listed debts of $92.7 million, with $90.5 million of that amount in unsecured promissory notes to 990 people who loaned him money over the last 40 years in exchange for a promise of an 8% annual return.

Marshall estimated his assets -- primarily more than 100 rental properties in the Hamilton area -- to be worth $21.9 million. Stevens has estimated that investors in Marshall’s promissory note fund will get back just 5 to 10 cents on the dollar after the properties are sold and closing and other costs are paid.

Shortly before the bankruptcy filing, New York Attorney General Letitia James announced her office was investigation Marshall for potential financial irregularities. And the U.S. Securities and Exchange Commission has since disclosed that it is investigating Marshall for possible securities law violations.

Many of the investors in the fund were clients of his tax preparation business, as well as friends and associates. Marshall told them he would use the money to buy rental properties in the in and around Hamilton, the Madison County village home to Colgate University.

Stevens has accused Marshall of running a Ponzi scheme since at least 2011, noting that Marshall acknowledged in a court appearance last year that, when investors asked for their money back, he sometimes paid them with money from newer investors.

Alliance Bank was acquired by NBT Bancorp in 2013. Oneida Savings was acquired by Community Bank in 2015.

Florence Doller, a spokesperson for NBT, said the bank could not comment about specific customer relationships as a matter of privacy, and additionally in this case because of the time that has passed and the fact that the relationship was prior to NBT acquiring Alliance.

Community Bank did not immediately respond to a request for comment.

Sarah Ruane, a spokesperson for the FBI, said that under Department of Justice policy, she could not confirm or deny the existence of an investigation into Marshall.

The U.S. Attorney’s Office, the U.S. Department of the Treasury and the state Department of Financial Services did not respond to requests for comment.

Jeffrey Dove, an attorney representing Marshall in the bankruptcy case, did not respond to a request for comment.

After apparently getting the boot from Alliance and Oneida Savings, Marshall began banking with Berkshire Bank. That bank is now the target of a class-action lawsuit filed in May by one of the investors in Marshall’s promissory note fund.

Mark S. O’Dell, of Morrisville, who invested $60,000 with Marshall, alleges in the lawsuit that Berkshire knew or should have known based on Marshall’s banking activity that the businessman was running a Ponzi scheme.

In his lawsuit, O’Dell argues Berkshire knew of Marshall’s “colossal commingling” of investor funds. The bank should have noticed the numerous deposits Marshall made of new investor money, coupled with Marshall quickly withdrawing those fund to pay previous investors, the lawsuit says.

Stevens disclosed the information about Alliance and Oneida Savings’ actions against Marshall and the federal and possible state probes in a footnote to a report on how Marshall ran his businesses.

In the report, he said he has tried to determine when Marshall knew that the amount of his liabilities markedly surpassed the value of his assets. The most obvious time when Marshall was “at least compelled to take a hard look at his assets, liabilities and business model” was when the banks prohibited him from doing business with them and the federal and state probes began, Stevens said.

The trustee said Marshall’s lack of proper financial accounting for his businesses has presented the biggest challenge to explaining exactly when and how he got into the financial mess he is in.

“For example, the trustee was unable to simply go to a centralized bookkeeping system and generate balance sheets that would show when, at least according to the books and records, Marshall became insolvent,” he said in the report.

Marshall’s poor record keeping might have been intentional, according to Stevens. He said he suspects, but does not know for certain, that Marshall’s failure to track his own financial affairs “may have been intentional in that it allowed him to have some plausible deniability regarding his increasingly disastrous financial condition.”

“For Marshall not to have known that his debt had grown to at least five times the most optimistic value of his assets is simply unbelievable,” Stevens said.

Rick Moriarty covers business news and consumer issues. Got a tip, comment or story idea? Contact him anytime:Email|X|Facebook| 315-470-3148