Tuesday, 28 June 2016
Last updated 15 min ago
Oct 23 2009 | 3:14am ET
Accused hedge fund fraudster James Nicholson may plead guilty to charges that he ripped investors off to the tune of $160 million, apologetic prosecutors said this week.
The U.S. Attorney’s Office in Manhattan sent an e-mail to victims of Nicholson’s alleged Ponzi scheme on Tuesday, indicating that Nicholson would change his plea to guilty at a hearing yesterday, the Bergen (N.J.) Record reported. That didn’t happen, and the prosecutor’s office on Tuesday quickly apologized for the mistake.
A spokesman for the U.S. attorney’s office told the Record that the e-mail was sent in error and incorrectly stated that yesterday’s hearing would be for Nicholson to change his plea. Instead, the court date was a status conference, which was itself rescheduled for next week. The judge in the case was expected to set a trial schedule at the conference.
The government did not say whether Nicholson would change his plea on securities fraud, investment adviser fraud and mail fraud charges in the future, and his lawyer told the Record, “I’m not taking a plea Thursday, that’s for sure—not as of now.”
“It is a possibility, but as of now there’s no agreement in place,” Erika Edwards said.
Nicholson has been charged with defrauding some 370 investors in his Pearl River, N.Y.-based hedge fund, Westgate Capital Management. According to the SEC complaint, at least one Westgate fund claimed positive returns in 98 of 99 consecutive months. Nicholson allegedly created a fictitious accounting firm and providing some of his investors with bogus audited financial statements. He apparently concocted this imposter firm under the name of an actual accountant while using his own telephone number and driver's license to set up a “virtual office.”
By late 2008, the Nicholson’s funds had sustained such losses that he could no longer honor redemption requests and hid his losses from investors with bogus sales brochures. He also closed one fund that was heavily invested in Lehman Brothers and folded its assets into another fund. In addition, he issued bad checks to some investors seeking to cash out, and ultimately suspended all investor redemptions due to what he called investors' “irrational behavior.”
If convicted, Nicholson faces up to 65 years in prison.