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His father was a Mexican diplomat, but it was the surname of his stepfather that he always used in his business dealings. That all-too-familiar Boston Brahmin name was surely an advantage when Carlton Penavera Cabot asked clients to entrust him with millions of dollars for real estate investments.

Cabot and business partner Timothy J. Kroll registered their Cabot Investment Properties in Boston and set up shop in Manhattan. Over more than a decade, they attracted more than $240 million from at least 513 investors for commercial real estate projects around the country, regulatory filings say.

Eventually, those investors lost it all. Real estate setbacks during the financial crisis apparently accounted for most of the losses. But federal prosecutors say that more than $17 million was pilfered by Cabot and Kroll to bankroll their lavish lifestyles as the business struggled.


By 2012, authorities began to receive complaints from investors about the firm. The Massachusetts Securities Division last year accused Cabot and Kroll of civil fraud, for allegedly taking $5 million from state residents, many of them retired, and using the money for extravagant personal expenses. It said the partners “artfully fabricated an air of prominence by associating themselves with the established names of the New England Cabot family.”

Now the men are facing criminal charges in New York. They were arrested last month at their homes — Cabot in Stamford, Conn., Kroll in New Hope, Pa. Both are free pending trial, on $1 million bail each.

The 52-year-old Cabot is mostly confined to his home with a GPS monitoring device, but allowed to drive his children to school, according to court records.

The US attorney in New York, Preet Bharara, alleged that the pair stole from investors to pay for personal and business expenses, including luxury apartment rentals in Manhattan and Miami, tuition for two of Cabot’s children, and a BMW for Kroll.


“They falsified financial statements in an attempt to cover their tracks,’’ Bharara said in a statement. Investors with the firm lost all their $240 million in principal, according to the allegations. The Postal Inspection Service and the IRS were part of the investigation, as were Massachusetts securities regulators.

Cabot and Kroll were each charged with seven counts of fraud, money laundering, and other charges. Cabot could not be reached at any of his listed phone numbers. His attorney did not return calls seeking comment.

“We have been working with the US attorney on this investigation since 2012,’’ said Secretary of State William F. Galvin. “We hope to get money for the Massachusetts investors.”

For Cabot, it has been a steep fall from his pedigreed upbringing. His father, now deceased, was Jaime Penavera, Mexico’s consul general in New York, according to Cabot’s 1987 wedding notice in The New York Times.

His mother, the late Maryellen Cabot, later married Louis Wellington Cabot of Boston, an heir to the Cabot Corp. chemical company fortune and a former chief of the Federal Reserve Bank of Boston.

Louis Cabot, now in his 90s, said in a brief phone interview that he had not been in touch with Carlton for many years.

Carlton Cabot took classes at Northeastern University, but did not graduate. He was first married on Cape Cod in 1987, to Carla Anne Pellegrino, whose family controlled the Prince Co. pasta company in Lowell. Cabot worked for Altman & Manley Advertising Co. in Boston, a firm that folded in 1997. The next year, according to public records, he and Kroll, now 44, launched Cabot Investment Properties.


It was in 2003 when their business of selling so-called tenants-in-common investments began in earnest, federal prosecutors allege. The firm oversaw 18 securities offerings in such properties as malls and office buildings, in which investors were promised a portion of the rental income.

Things began to go seriously wrong in 2008, as the financial crisis hit and property values slumped, according to court records in New York. The company started losing money “precipitously,’’ about $7.7 million in 2008, followed by $7.2 million in 2009, according to the records.

By 2010, Cabot allegedly asked his bankers to sell his Massachusetts home at a loss in order to raise cash. He wanted the deal done as quickly as possible, court records show, because of “significant business reversals which have had a profound impact on all aspects of [his] life.”

Cabot’s siblings are also stepchildren of Louis Wellington Cabot and go by the name. One of them, his sister, has been embroiled in legal battles of her own in recent years.

Melanie H. Cabot has been engaged in a decadelong fight with former business partners over a book of maps they set out to publish and which she is accused of trying to steal.

A civil lawsuit over that dispute is nearing a conclusion in Suffolk Superior Court, after years of delays while she filed for bankruptcy protection in Florida.


David H. Rich, a Boston lawyer speaking on behalf of Melanie Cabot’s former business partners, said, “This has been a 10-year journey, and, from their perspective, a journey to get to the truth. They’ve alleged in the lawsuit that Ms. Cabot violated her legal obligations to them separately by usurping corporate property for personal gain.”

Melanie Cabot filed for personal bankruptcy protection in 2007. In her bankruptcy case, the judge ruled she had not been truthful and had hidden assets, including a $150,000 investment in her brother Michael Cabot’s Florida real estate investment company at the time, Mariner Asset Management, according to court documents.

Michael was involved in the same type of tenant-in-common investments as his brother Carlton.

Efforts to reach Michael and Melanie Cabot and their attorneys were unsuccessful.

Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.