Ponzi Schemer Nicholson, Prosecutors To Debate Losses

May 28 2010 | 9:44am ET

Convicted hedge fund fraudster James Nicholson will be in court today as his attorneys and prosecutors wrangle over how long he should spend in prison for stealing $133 million.

Nicholson, who ran Westgate Capital Management, faces up to 45 years in prison. Both sets of lawyers will discuss his sentence, as well as the estimated amount of losses suffered in his scheme and how much Nicholson should have to forfeit, at a pre-sentencing hearing in Manhattan. Nicholson, who pleaded guilty to running a Ponzi scheme in December, will be sentenced on June 30.

At his plea hearing, Nicholson admitted he began lying to investors as far back as 2004. But the meat of the scam didn’t come until the collapse of Lehman Brothers, which in turn precipitated the collapse of Nicholson’s seven hedge fund. In the wake of his losses on the Lehman bankruptcy, Nicholson lied to investors about his returns and how much the funds were managing: He claimed to run $900 million; he actually ran no more than $60 million.

Nicholson’s scam fell apart in December 2008, when $5 million in redemption checks bounced.

Prosecutors have filed 39 letters from victims with the court. They claim he stole more than $140 million; Nicholson claims the figure is between $7 million and $20 million. Much of today’s hearing will be dedicated to figuring out which side is right.

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