2ND UPDATE WRITE-THRU 1:30 PM: The indictment of financial advisor and accountant Kenneth Starr has the potential to be every bit as serious as the one that gripped Hollywood when Cassanda Group’s Dana Giacchetto fell from grace after defrauding some of Hollywood’s biggest names in the 1990s.

Starr was arrested along with an associate, Andrew Stein, the former New York City Council president who’s accused of making false statements to the IRS. A 37-page complaint unsealed today in Southern District Court bares the detail of how Starr allegedly helped himself to client money, and then moved money from other client accounts to cover shortfalls when questions were asked.

The complaint describes by profession, but doesn’t name, several of the cheated clients who helped sniff out trouble when they questioned irregularities in their statements. I’ve heard that “the actress” is Uma Thurman, and the “former talent agency exec” is Jim Wiatt, and the “elderly heiress” is Bunny Mellon. There is a jeweler who, the complaint alleges, is missing millions, and word is that’s Yakov Arabov, aka “Jacob the Jeweler” to customers who include many hip hop celebs.  Also, sources said that authorities have been investigating Starr for months. I’m told that, while press reports list scores of well known clients, many including Martin Scorsese left with their business managers well before today’s indictment was leveled — and likely emerged unscathed.

One of those is celebrity photographer Annie Leibovitz, who issued this statement: “News of Ken Starr’s arrest does not come as a complete surprise to me, and I will follow this story with great interest. Ken Starr no longer represents me and has not for some time.”

The complaint alleges that Starr used the funds to finance such purchases as a five bedroom condo on the Upper East Side that cost at least $7.5 million with a 32-foot lap pool and a 1,500 square foot garden.

EARLIER 8:15 AM: The Securities and Exchange Commission is on a roll with Hollywood. One day after arresting a Disney employee and her boyfriend for allegedly selling the corporation’s earning report, the financial advisor Kenneth Starr was arrested and charged with running a $30 million fraud scheme. This could get hairy. I’ve heard Starr’s clients include Martin Scorsese, Uma Thurman, former WME topper Jim Wiatt, Candice Bergen, Jonathan Demme, Al Pacino. He also reportedly has handled such luminaries as Henry Kissinger, Caroline Kennedy, Robert Ziff and others.

Word of his pending indictment made the rounds of the film industry this morning. According to the Wall Street Journal, Starr, who runs Starr Investment Advisors and Starr & Co., is accused of using client money to purchase a five-bedroom townhouse in Manhattan. A formal announcement of the charges is scheduleed for 1 PM East Coast time.

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