Westgate's Nicholson Gets 40 Years

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.


In Depth

Part II: Roubini Talks Risk, Recovery And The Threat Of A Triple Dip Recession

Oct 21 2014 | 12:41pm ET

In the second half of our interview with Nouriel Roubini, FINalternatives editor...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Demeter: Family affair

David and James Hamman launched their fundamental Livestock and Grains Program in March of 2010 but it really was decades in the making.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.