Sunday, 23 April 2017
Last updated 1 day ago
Nov 1 2010 | 12:24pm ET
Despite the pleas of James Nicholson's attorneys, U.S. District Judge Richard Sullivan on Friday imposed a "draconian" penalty for the former hedge fund manager's $140 million Ponzi scheme.
Nicholson was sentenced to 40 years in prison after the judge heard damning testimony from the victims of his fraud, which one said "affected generations." The judge also cited the letters of the Westgate Capital Management founder's three young children, who range from seven to 12 years of age, noting that he was "heartbroken" reading them.
"I look at you and I don't know what to make of this," Sullivan said. Still, he imposed a sentence toward the higher end of the 30-to-45 year sentencing guideline—a move characterized as "draconian" by Nicholson's counsel in a pre-sentencing memorandum.
The 44-year-old, who sat stiffly for most of the two-hour hearing, offered only that he had "no excuse for my conduct, just regret and remorse."
Nicholson pleaded guilty in December to running the Ponzi scheme, admitting that 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 funds. 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.
Nicholson may have fellow Ponzi schemer Bernard Madoff to thank for the collapse of his own fraud, as investors spooked by Madoff's $65 billion crime rushed for the exits.
"Who would have ever thought Bernie Madoff would be a blessing in disguise?" asked victim Stephanie Chamberlin.