By Jonathan Stempel
NEW YORK (Reuters) - A former private equity executive was sentenced on Monday to nearly 22 years in prison, the maximum term, for his role in what authorities called a $255 million real estate Ponzi scheme targeting Orthodox Jews.
Joseph Shereshevsky, a former chief operating officer at WexTrust Capital LLC, had pleaded guilty in February to securities fraud, mail fraud and conspiracy over the scheme, which investigators said ran from 2005 to 2008.
At his sentencing by U.S. Circuit Judge Denny Chin in Manhattan, the Norfolk, Virginia resident was also ordered to pay $7.88 million in restitution and forfeit $9.2 million.
Steven Byers, co-founder and chief executive of Chicago-based WexTrust, had been sentenced by Chin in April to 13 years, four months in prison after pleading guilty to securities fraud and conspiracy.
Shereshevsky's plea agreement called for a prison term of 210 to 262 months. His lawyer, Mark Harris, sought a 10-year sentence, citing his 55-year-old client's charitable pursuits and "terrible health," including obesity, diabetes, two prior heart attacks and an enlarged heart.
But Chin, the same judge who in 2009 sentenced Ponzi scheme operator Bernard Madoff to 150 years in prison, read to a full courtroom from several of the 80 letters he said he had received from Shereshevsky's victims. The judge said Shereshevsky had not previously shown remorse.
"Mr. Shereshevsky very much had a controlling role in this criminal enterprise," Chin said. The judge said he took the defendant's good deeds with "a grain of salt. He was clearly being generous with money that he had stolen from others."
Harris declined to comment after the hearing.
Investigators including the U.S. Securities and Exchange Commission had accused Shereshevsky and Byers of conducting at least 60 private placements purportedly to fund commercial real estate ventures, when in fact they were diverting money to themselves or to pay off prior investors.
In one case, investigators said the men had falsely represented that $9.2 million would be spent on seven commercial properties to be leased to the U.S. General Services Administration.
In its 2008 civil complaint, the SEC said WexTrust had raised $255 million from at least 1,196 investors. The SEC said Byers had focused on real estate investments, while Shereshevsky had overseen real estate and diamond mining assets and had used his contacts in the Orthodox Jewish community to solicit investors.
Wearing a dark gray shirt and a yarmulke, Shereshevsky choked up several times in pleading before Chin for leniency.
"I take full responsibility," he said. "I am very worried for what God has in store for me for desecrating his name ... To the investors, I destroyed you, and I am sorry."
Joel Pogolowitz, who said his late mother lost much of her money with WexTrust, urged a maximum sentence.
"You lied to my mother," Pogolowitz told the defendant, who was staring at the judge, occasionally rubbing his eyes beneath his glasses. "You made her think that she was special, and that you were truly looking out for her financial well-being ... You also violated the Eighth Commandment, 'Thou shalt not steal.'"
Chin was elevated last year to the federal appeals court in New York, but kept control of the WexTrust case.
The case is U.S. v. Byers et al, U.S. District Court, Southern District of New York, No. 08-01092.
(Reporting by Jonathan Stempel)