Gucci Portfolio? Nah, It's a Fake.

The phrase "Gucci fakes" usually conjures up images a of knockoff designer bags sold on street corners. Customers may pay a tenth of the price for an original, but they usually know that they're getting what they pay for.

For one investment professional, though, buying Gucci fakes resulted in a multi-million dollar mistake, and nothing to show for it.

Timothy Khan was sentenced to 51 months in prison and ordered to pay over $8 million in restitution Thursday for the fraudulent sale of millions of Gucci stock options, according to the United States Attorney for the Southern District of New York.

In 1995 Khan, a Canadian citizen, allegedly enticed the investor by telling him that Khan was on the advisory board of the struggling retailer of designer goods. Because of his prominent position of the board, Khan told the investor, he had the opportunity to obtain options to buy Gucci stock at a discounted price from that offered in the company's I.P.O.

Khan told the investor that Gucci's C.F.O. had allowed him to sell millions of shares of Gucci for $7.50 and $14 per share, instead of the I.P.O. price of $22 per share. Khan backed up his story with fake documents purportedly signed by Gucci's C.F.O.

Soon thereafter, the victim wired Khan millions of dollars -- almost $7 million in total, according to the initial complaint against Khan.

In 1996 the victim ordered Khan to exercise the Gucci options and sell the stock. But from early 1996 to April 2007, Khan provided the investor with various fake excuses for not being able to make the transaction happen.

Khan told the investor, for example, that the "European Union Tax Authority" was delaying distribution of the proceeds. But no such institution exists, it turns out.

And Gucci officials recently confirmed that Khan was never associated with Gucci.

Khan was ordered to pay $8,603,720 in restitution.

by Alfonso Serrano F.