By Nate Raymond
NEW YORK (Reuters) - A U.S. appeals court on Wednesday ruled that a federal judge was justified in increasing the prison sentence of money manager and arts patron Alberto Vilar to 10 years in prison from nine for securities fraud.
But the 2nd U.S. Circuit Court of Appeals in New York vacated the $10 million in fines imposed on Vilar and Gary Tanaka, his business partner at the now-defunct Amerindo Investment Advisers Inc, who also was convicted of securities fraud.
Vilar, 75, was found guilty in 2008 of securities fraud and money laundering charges for engaging in a fraudulent investment scheme.
He was initially sentenced to five years in prison and Tanaka to five. A federal appeals court in 2013 ordered them resentenced in light of a U.S. Supreme Court ruling that affected how punishments should be calculated.
At their 2014 resentencing, U.S. District Judge Richard Sullivan said a longer period of incarceration was justified because the pair had taken steps to prevent victims of their crimes from being repaid.
Sullivan gave Vilar and Tanaka each an extra year in prison and increased their fines to $10 million from $25,000.
On appeal, Vilar and Tanaka said Sullivan's decision was based on their 2013 appeal. The 2nd Circuit disagreed, saying there "was no reasonable likelihood of vindictiveness."
In vacating the fines, the three-judge panel noted the two were indigent and were already ordered to forfeit $20.6 million and pay $26.6 million in restitution, plus tens of millions more in a U.S. Securities and Exchange Commission case.
Michael Bachram, Vilar's lawyer, said he was pleased with the decision on the fines and might seek reconsideration of the prison term. Tanaka's lawyer did not respond to a request for comment.
Vilar, whose Amerindo at its height had $10 billion under management, ranked high in the culture world for the millions he gave but fell short in promised donations to the Metropolitan Opera in New York, the Los Angeles Opera and other groups.
Prosecutors said beginning in 1986, Vilar and Tanaka engaged in a fraudulent scheme by investing in risky stocks against Amerindo clients' wishes and offering high returns by investing in a sham product.
Prosecutors said that after the tech bubble burst in 2002, Vilar and Tanaka stole client money to pay their bills.
The case is U.S. v. Vilar et al, U.S. District Court, Southern District of New York, No. 05-cr-00621.
(Reporting by Nate Raymond in New York; Editing by Lisa Von Ahn)