Judge refuses to cut New York fund manager's 40-year Ponzi sentence

Reuters News
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Posted: Sep 22, 2014 2:10 PM

By Jonathan Stempel

NEW YORK (Reuters) - A federal judge rejected Westgate Capital Management LLC founder James Nicholson's request to shorten his 40-year prison term for running a $140 million Ponzi scheme at his hedge fund firm, likening it to the much larger fraud run by Bernard Madoff.

U.S. District Judge Richard Sullivan in Manhattan on Monday turned aside Nicholson's claims of ineffective assistance of counsel by his former lawyer, saying he would have imposed the same sentence even if other legal arguments had been made.

The judge also discussed Nicholson's "truly voracious" appetite for luxury homes and cars, and referred to the 150-year prison term imposed on Madoff in June 2009 by then-U.S. District Judge Denny Chin for what prosecutors called a $64.8 billion Ponzi scheme.

"As Judge Chin said when sentencing (Madoff), this conduct was truly evil, and the lives of many of the investors from whom he stole will never be the same," Sullivan wrote, referring to Nicholson. The judge said some of the 250 victims, including people in their 80s, lost all or most of their life savings.

Nicholson, 48, was sentenced in October 2010 after pleading guilty the prior December to securities fraud, investment adviser fraud and mail fraud charges.

Prosecutors said the defendant's scheme was exposed after some investors, many of whom lived in New York and New Jersey, sought to redeem their money in the wake of Madoff's arrest.

"With due respect to Judge Sullivan, the two cases are very, very different," said Andrew Frisch, Nicholson's current lawyer, in a phone interview. "We're disappointed, and are pursuing an appeal."

Frisch also represents Daniel Bonventre, a former Madoff operations manager who awaits sentencing following his conviction for helping his former boss commit fraud.

A Ponzi scheme occurs when new client money is used to repay earlier investors.

The case is Nicholson v. U.S., U.S. District Court, Southern District of New York, No. 11-03835.

(Reporting by Jonathan Stempel in New York; Editing by Tom Brown)